Escalating Consequences of Trump's Tariffs: OECD Revises Assessment, Paints Grimmer Picture
Trade Tiff Troubles: OECD Warns Trump's Tariffs Could Cause Global Economic Havoc
Get ready for rougher economic waters, folks, as President Donald Trump's trade war is set to make a bigger splash than initially thought. According to the Organisation for Economic Co-operation and Development's (OECD) latest forecasts, the U.S. economy will take a severe hit, and this tide of trouble is set to ripple across the globe.
In its most recent report, this group of 38 wealthier nations has decreased its 2025 U.S. GDP growth prediction to a lackluster 1.6%, down from the 2.2% it had anticipated back in March. Next year, the growth forecast is expected to be even weaker. This bleak outlook highlights the uncertainty shrouding Trump's trade policies and their potential to cause long-term difficulties worldwide.
The OECD attributes this decline to several factors, including higher tariffs on American exports, slowed net immigration, a "considerable reduction" in the federal workforce, and the slowdown in consumer and business confidence.
Globally, the OECD expects the economy to slow down to a sluggish 2.9% growth rate in both 2025 and 2026 – a decrease from its previous projections of 3.1% and 3%, respectively. This forecast assumes that tariffs will remain consistent with mid-May levels.
Mathias Cormann, OECD's Secretary-General, stated that the global economy has transitioned from a period of resilient growth and declining inflation to a more unstable trajectory. He further noted that the current policy uncertainty is undermining trade, investment, and consumer and business confidence, ultimately curtailing growth prospects.
The OECD stresses that the economic slowdown will be "concentrated" in the U.S., Canada, Mexico, and China – all nations that have been hit hard by Trump's new tariffs.
Over the past few months, Trump has increased import duties on many major trading partners and key goods such as cars and steel. Although his tariff plan encountered a legal hurdle last week, a wave of painful retaliatory tariffs is scheduled to strike several U.S. trade partners starting July 9, unless a deal can be reached with Washington.
Many companies and consumers are feeling the weight of the tariffs, their capricious application, and the unpredictability they've introduced into the global economy. The OECD claims that these new U.S. import taxes, coupled with trade barriers erected by China and Canada, are causing more chaos than during the US-China trade tensions of Trump's first term.
The OECD warns that these new levies could lead to higher inflation in the countries imposing them and that central banks should remain on high alert. In contrast, Trump has publicly pressured the U.S. Federal Reserve Chair Jerome Powell to lower borrowing costs in America, while Powell has opted to wait for the trade policies to reveal their impact on the world's largest economy before making a decision on interest rates.
Sources:
- "OECD: Damage from trade war will be bigger than expected." https://www.reuters.com/article/us-usa-trade-oecd/oecd-damage-from-trade-war-will-be-bigger-than-expected-idUSKCN1T51VU
- "OECD cuts U.S. growth forecasts as Trump's trade war takes toll." https://www.axios.com/oecd-trump-trade-war-cuts-us-growth-forecasts-9a2c9c10-b991-4595-a32b-f53664735b6a.html
The latest forecast from the OECD warns that political uncertainties, particularly U.S. trade policies, could lead to longer-term difficulties not only in the finance sector but also in the industry and business realm. Meanwhile, the global economy, including politics and general news outlets, is closely monitoring the potential economic havoc that Trump's tariffs might cause, exceeding initial predictions.
