The Organisation for Economic Co-operation and Development (OECD) has warned that President Donald Trump’s escalating trade tariffs will weaken global economic growth and drive inflation higher. Canada and Mexico are expected to suffer the greatest impact due to the severe tariffs imposed on them, though the US economy will also be affected. The OECD has significantly lowered its growth projections for Canada, while forecasting that Mexico could slide into recession.
The US has implemented 25% tariffs on steel and aluminium imports, as well as additional levies on goods from Canada, Mexico, and China. In response, both Canada and the European Union have introduced their own retaliatory tariffs. The OECD stated that rising trade barriers and growing uncertainty in global policies are discouraging investment and dampening consumer spending. As a result, it now expects Canada’s economy to grow by just 0.7% this year and in 2026, far below previous forecasts. Mexico’s economy is predicted to shrink, while US growth expectations have also been revised downwards.
Despite the US targeting China with tariffs, the OECD has slightly raised its growth outlook for the country, forecasting expansion of 4.8%. However, it warned that ongoing trade disputes would fuel inflation, likely keeping interest rates elevated for an extended period. The organisation cautioned that greater economic fragmentation could pose a serious risk, with further trade restrictions threatening growth worldwide and increasing inflationary pressures.
The global economy is now projected to slow from 3.2% growth in 2024 to 3.1% in 2025, largely due to the effects of rising trade tensions. Tesla, the electric car company led by Elon Musk, has already raised concerns, warning that US exporters could suffer significant harm if other nations retaliate against American tariffs. The OECD also revised its UK growth forecast downwards to 1.4% in 2025 and 1.2% in 2026, though it remains more optimistic than the Bank of England, which recently cut its own projections.
