OECD Cuts Global Growth Outlook and Warns of Economic Fallout from US Trade War

The OECD has revised its economic growth forecast downwards, attributing the change to significant adjustments in trade policies by the US and subsequent retaliatory actions by other G20 nations.

According to the Interim Economic Outlook, the organization now anticipates global GDP growth to reach 3.1% in 2025, a 0.2 percentage point decline from its previous report and from the actual global growth in 2024. Additionally, the OECD has adjusted its 2026 projection to 3.0%.

The implemented tariffs by the US on imports from China, Canada, and Mexico, along with the retaliatory measures taken by Ottawa and Beijing, are foreseen to boost revenues for the enforcing governments. However, the negative impact on global economic activity, incomes, and tax revenues is expected to counterbalance these gains.

The OECD further indicates that US economic growth is anticipated to decrease to 1.6% in 2026 from 2.8% in 2024, while Canada’s growth is projected to decline from 1.5% to 0.7% during the same period. Mexico, on the other hand, is poised for a 1.3% contraction this year and a 0.6% decline next year after achieving 1.5% growth in 2024.

Moreover, the OECD highlights that the tariffs are likely to escalate trade expenses, potentially leading to cost transfers to consumers and influencing inflation rates. The organization also warns of elevated inflation levels compared to previous expectations and expresses concerns over potential inflation resurgences or unexpected economic downturns, which could trigger financial market repricing and heightened volatility. Notably, the OECD voices apprehensions about a further division in the global economy.

 

OECD GDP Growth Forecast (2024-2026)