The Organization for Economic Cooperation and Development (OECD) forecasts that global economic growth will slow due to tariff hikes imposed by the Trump administration. This is expected to increase inflation and reduce economic activity in most countries.
Tariff Increases and Trade Partner Impacts
The OECD's forecast assumes tariffs on imports from Mexico and Canada will rise by 25 percentage points. China will continue to face 20% tariffs on exports to the U.S., along with higher duties on steel and aluminum. OECD's chief economist Alvaro Pereira highlighted that uncertainty about Trump's trade policies already affects global markets, with growth forecasts cut for almost all countries.
Inflation and Impact on U.S. Households
The OECD warns that new 10% tariffs could shrink global economic output by 0.3% by 2026. These measures will also impact consumer purchasing power in the U.S., translating to a $1,600 loss per household. Inflation is expected to rise by a third of a percentage point across major economies, potentially forcing central banks to delay interest rate cuts.
China and Eurozone Economic Outlook
The OECD slightly raised China's growth forecast, expecting 4.8% growth in 2025, while the eurozone and Germany face lowered forecasts. Germany's increased infrastructure spending is expected to improve the economic outlook.
OECD's conclusions indicate potential challenges for the global economy due to trade barriers. Expected are both negative effects on inflation and growth, and possible economic benefits for some countries like China. Central banks and governments will need to address these challenges in their future planning.
