The Organisation for Economic Co-operation and Development (OECD) has cautioned that Donald Trump’s trade wars are disrupting the global economy, hindering recovery efforts to rejuvenate growth and combat inflation.
In its most recent assessment of the world economy’s wellbeing, the prominent institution based in Paris revised down its forecasts for global growth this year and next, indicating a significant decrease in activity across the US, Canada, and Mexico.
The OECD has lowered its growth projection for the UK by 0.3 percentage points to 1.4% for this year and by 0.1 percentage points to 1.2% for 2026.
The organization representing the world’s wealthiest economies stated that recent gains in economic growth and efforts to reduce inflation are being compromised by the fallout from increased trade barriers and growing geopolitical instability.
The global growth forecast for this year was reduced from 3.3% to 3.1%, with significant risks still in play. The global economy experienced a growth of 3.2% in 2024.
Wider and more substantial increases in trade barriers would negatively impact growth and exacerbate inflation. Conversely, a decrease in barriers would help alleviate uncertainty and bolster activity.
“Significant risks remain. The further fragmentation of the global economy is a primary concern. Increased trade barriers would affect growth worldwide and contribute to inflation,” the OECD stated in its interim economic outlook report.
The OECD noted: “Governments must collaborate to address their concerns within the global trading system to prevent an escalation of retaliatory trade barriers among nations…”
“A widespread increase in trade restrictions would greatly harm living standards.”
Assuming Trump proceeds with plans to impose 25% tariffs on nearly all merchandise imports from Canada and Mexico starting in April, the OECD predicted that activity would decline and inflation would rise across all three economies.
The report indicated that Mexico would fall into a severe recession this year, with output contracting by 1.3% in 2025 and 0.6% in 2026, and it significantly lowered its growth predictions for Canada by nearly half.
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The OECD revised its US growth estimates down from 2.5% to 2.2% for this year and from 2.1% to 1.6% for 2026, while growth in China is expected to decrease from 4.8% this year to 4.4% by 2026.
Being a comparatively small open economy, the UK would also suffer from diminished international trade and business investment opportunities.
With the UK government facing pressure regarding the economy prior to next week’s spring statement, Chancellor Rachel Reeves remarked that the OECD report signifies a global shift.
“Increasing global challenges such as trade uncertainty are being felt universally. A transforming world necessitates that Britain adapt as well, and we are ushering in a new era of stability, security, and renewal to safeguard working citizens and maintain the safety of our nation,” Reeves stated.
“This enables us to better address global uncertainties, with the UK projected to be the fastest-growing G7 economy in Europe over the coming years, following only the US.”
In the UK, the OECD maintained its inflation predictions at 2.7% for this year and 2.3% for 2026.
