Paris (Reuters) - President Donald Trump's tariff increases are projected by the OECD to slow down economic growth in Canada, Mexico, and the United States while leading to inflation. The organization warned of a potential decline in global economic performance with a broader trade conflict exacerbating the situation.
The OECD interim outlook suggested that in the event of a widespread trade disruption, the U.S. would face economic slowdowns surpassing the benefits expected from the tariffs. Global growth is anticipated to decrease from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, with divergent impacts across major economies.
The OECD highlighted that increased tariffs would impede global business investment, elevate inflation, and necessitate prolonged higher interest rates. Revised projections considered a 25 percentage point hike in tariffs on U.S. imports from its neighbors commencing in April.
Effects of these changes include a slowdown in U.S. growth to 2.2% this year and 1.6% the next, a contraction in the Mexican economy, and reduced growth in Canada. Despite these challenges, China's growth is forecasted to counterbalance negative impacts. However, an escalation of the trade war could significantly worsen the global economic outlook, with increased tariffs projecting adverse effects on global growth and inflation. In this scenario, the U.S. economy would be notably affected, leading to higher costs for households and potentially contradicting the fiscal benefits intended by the administration.