President Donald Trump's decision to impose tariffs is projected by the OECD to hinder economic growth in Canada, Mexico, and the United States, leading to increased inflation. The OECD warns that an extended trade war would further deteriorate global growth. The organization estimates that if there is a broad trade disruption, the economic slowdown would cost the United States more than the additional income the tariffs aim to generate.
The OECD's current economic outlook indicates a slight decline in global growth from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026. The previous projection from December foresaw growth of 3.3% for both this year and the next. While global growth is slowing down, certain major economies, such as China, are showing resilience, which is compensating for the significant slowdown in North America.
The OECD predicts that the increase in tariffs will negatively impact global business investments and result in higher inflation rates. Consequently, central banks may need to maintain high-interest rates for a longer period. Assuming additional tariffs are imposed on most goods imports between the U.S. and its neighboring countries from April, the OECD revised its forecasts accordingly.
The United States is anticipated to experience a slowdown in economic growth to 2.2% this year and a further decline to 1.6% next year. Mexico will be most affected by the tariff hikes, with its economy expected to contract by 1.3% this year and 0.6% next year instead of growing at the previously projected rates.
Canada's growth rate is estimated to decrease to 0.7% for both this year and the next, which is significantly lower than the previously expected 2% growth in both years. The euro area is expected to see a slight economic uptick with 1.0% growth this year and reaching 1.2% next year.
Despite the impact of higher tariffs on the world's second-largest economy, China, stronger government support is seen offsetting these effects, resulting in expected growth of 4.8% in 2025 and a slight slowdown to 4.4% in 2026.
The OECD cautions that the global economic outlook could deteriorate significantly if the U.S. escalates the trade war by imposing tariffs on all non-commodity imports and if its trading partners respond in kind.