Trump's tariff fallout? It's worse than we previously thought, says OECD
President Donald Trump's trade war will wreak greater economic damage than previously expected, both in the United States and everywhere else, according to new forecasts by the Organisation for Economic Co-operation and Development.
In a report Tuesday, the group of 38 mostly wealthy nations sharply downgraded its 2025 economic growth forecast for America to 1.6% from the 2.2% projected in March and said growth would be even weaker next year.
The report underscores the uncertainty and chaos around Trump's tariffs, as well as their potential to cause lasting harm across the world.
The Paris-based organization cited higher tariffs, including retaliatory tariffs imposed on American exports, a slowdown in net immigration and a 'sizable reduction' in the federal workforce.
The OECD also expects the global economy to slow markedly to 2.9% growth both this year and next — a downgrade from its prior forecasts of 3.1% and 3% respectively. That's based on the assumption that tariffs worldwide will remain at their mid-May levels, it said.
'The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,' OECD Secretary-General Mathias Cormann said in a statement. 'Today's policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.'
In its Economic Outlook report, the OECD said it expects the slowdown to be 'concentrated' in the US, Canada, Mexico and China — four of the countries most affected by Trump's new tariffs.
Since retaking office in January, the US president has hiked import duties on most of America's trading partners and on key goods, including cars and steel. Despite his tariff plan hitting a legal stumbling block last week, a round of punishingly high 'reciprocal tariffs' are due to whack many of America's trading partners from July 9 unless they can strike a deal with Washington.
The tariffs, their erratic implementation and the unpredictability that both have injected into the global economy are weighing on many businesses and consumers.
According to the OECD, the new US import taxes, in combination with retaliatory trade barriers erected by China and Canada, are 'pointing to much greater disruption than during the US-China trade tensions in 2018-19' — a reference to the trade war during Trump's first term.
The OECD said new levies risk pushing up inflation in the countries imposing them and that central banks — which hike interest rates to slow price rises — should 'remain vigilant.'
In contrast, Trump has publicly pressured US Federal Reserve Chair Jerome Powell to cut the cost of borrowing in America, while Powell has preferred to wait to see how the president's tariffs will impact the world's largest economy before deciding whether to cut or raise rates.
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