The Organisation for Economic Co-operation and Development (OECD) has raised alarms over the economic impact of former President Donald Trump's tariff policies, which are reportedly hindering economic growth both in the United States and globally. According to the OECD, these policies have created a challenging economic environment that could stifle progress and elevate inflation rates. The latest projections from the OECD suggest a sharp decline in U.S. economic growth, with predictions of a 2.2% growth rate in 2025, dwindling to just 1.6% in 2026.
Last year, the U.S. economy managed a growth rate of 2.8%, but the OECD's forecasts indicate a significant slowdown in the near future. The tariffs, which Trump has pledged to impose at a 25% rate across major trading partners, are also contributing to rising prices. The OECD anticipates an uptick in U.S. inflation this year, projecting it to reach 2.8% by 2025, compared to 2.5% last year.
Mexico and Canada, two of America's closest trading partners, are also expected to experience economic setbacks. Mexico's economy is predicted to shrink by 1.3% this year and by 0.6% in 2026. Meanwhile, Canada's growth is anticipated to be just 0.7% this year and next, falling short of the previously forecasted 2% growth outlined in a December report.
The OECD's report underscores the ramifications of Trump's trade policies on global economics.
“If the announced trade policy actions persist, as assumed in the projections, the new bilateral tariff rates will raise revenues for the governments imposing them but will be a drag on global activity, incomes and regular tax revenues,” the OECD stated.
The tariffs are not only raising concerns about growth but also about inflation, as they are expected to reignite inflationary pressures, prompting central banks to maintain higher interest rates for an extended period. The OECD had previously projected U.S. inflation to be around 2.1% this year and expected global economic growth to rise to 3.3%. However, current estimates show a bleaker picture with inflationary pressures mounting.