US tariffs hurting global economy: OECD report

United States President Donald Trump's trade tariffs are hurting the whole world's economy, the Organisation for Economic Co-operation and Development, or OECD, reported on Monday.

The 38-member intergovernmental organization that advocates for the market economy said in its latest Interim Economic Outlook that it had downgraded its global economic growth prediction, with global GDP growth set to slide from 3.2 percent in 2024 to 3.1 percent in 2025. The OECD said global GDP growth will likely slow further, to 3 percent, in 2026.

Before Trump's tariffs were announced, the OECD had predicted global GDP growth would hit 3.3 percent in both 2025 and 2026.

Trump introduced the tariffs to stimulate his own country's economy, but the OECD said they will damage it as well, with US GDP growth now expected to slump to 2.2 percent in 2025 and 1.6 percent in 2026 after it had been expected to stand at 2.4 percent this year and 2.1 percent next year.

There was a modicum of good news for the European Union, with the OECD saying it may not be hit as hard as first feared.

"European economies will experience fewer direct economic effects from the tariff measures incorporated in the baseline projections, but heightened geopolitical and policy uncertainty is still likely to restrain growth," the report added.

The Paris-based OECD said the United Kingdom's economy will likely grow by 1.4 percent in 2025, instead of the 1.7 percent that had been expected.

The UK's Chancellor of the Exchequer Rachel Reeves told Sky News: "This report shows the world is changing, and increased global headwinds, such as trade uncertainty, are being felt across the board."

Slower GDP growth will likely send the rate of inflation soaring in the G20 countries, up to 3.8 percent in 2025 and 3.2 percent in 2026, the OECD said.

The organization said Canada and Mexico will be hit hard by Trump's tariffs, with growth likely to be around 0.7 percent this year and next year in Canada, when 2 percent had been expected for both years.

It also stated Mexico could be hit the hardest of all, with the nation being forced into a recession because of the tariffs that look set to cut output by 1.3 percent in 2025 and 0.6 percent in 2026, when the growth of 1.2 percent and 1.6 percent had been expected.

The OECD said ordinary people will pay the price of Trump's decision to impose tariffs and that things could go from bad to worse.

"Further fragmentation of the global economy is a key concern," the report added. "Higher and broader increases in trade barriers would hit growth around the world and add to inflation."

"Governments need to find ways of addressing their concerns together within the global trading system, to avoid a significant ratcheting up of retaliatory trade barriers between countries," it stated.

earle@mail.chinadailyuk.com