OECD Warns: US Trade Tariffs to Stifle Canada’s Growth, Global Economy at Risk

The global economy is bracing for a slowdown as US President Donald Trump’s aggressive trade policies continue to take a toll, the Organisation for Economic Co-operation and Development (OECD) has warned. The Paris-based institution’s latest forecast paints a grim picture, particularly for Canada and Mexico, which are expected to bear the brunt of the trade war’s economic consequences.

The OECD has sharply downgraded its growth projections for Canada, slashing its economic expansion forecast to just 0.7% for both this year and 2026—less than half of its previous 2% prediction. Meanwhile, Mexico is projected to plunge into a recession, with its economy expected to contract by 1.3% this year and shrink further by 0.6% in 2025. Previously, the country was expected to grow by 1.2% and 1.6% in those respective years.

Trump’s administration has imposed steep 25% tariffs on steel and aluminum imports and an additional 25% duty on various imports from Canada and Mexico, with some exemptions. In response, both Canada and the European Union have introduced retaliatory tariffs, further straining international trade relations.

While the US has imposed broad tariffs on imports from China, Canada, and Mexico, its own economy is not immune to the repercussions. The OECD now expects US economic growth to slow to 2.2% in 2024 and 1.6% in 2025, marking a downward revision from previous estimates of 2.4% and 2.1%, respectively.

Despite US tariffs on Chinese goods, China’s economic growth forecast has been revised slightly upwards to 4.8%, suggesting that Beijing may be weathering the trade war more effectively than anticipated.

The OECD has warned that escalating trade barriers and mounting geopolitical tensions are dampening investment and household spending worldwide. It now forecasts that global economic growth will slow from 3.2% in 2024 to 3.1% in 2025, with trade tensions cited as a primary factor.

Inflation, another major concern, is expected to remain persistent. Across the world’s 20 largest economies, the OECD predicts an inflation rate of 3.8% for 2024—higher than its previous 3.5% forecast. This suggests that central banks, including the US Federal Reserve, may keep interest rates elevated for a longer period to counteract rising prices.

The ramifications of the ongoing trade conflict are being felt across industries. Last week, Tesla, the electric vehicle giant led by Elon Musk, cautioned that US exporters could face severe consequences if other nations retaliate against American tariffs. In a letter to the US Trade Representative, Tesla warned that American firms were “exposed to disproportionate impacts” due to the escalating trade dispute.

The OECD’s latest report also revised the UK’s economic growth forecast downward. The UK is now expected to grow by 1.4% in 2025, down from the previous 1.7% projection, and 1.2% in 2026, slightly lower than the earlier 1.3% estimate. However, these figures remain more optimistic than the Bank of England’s recent revision, which slashed the UK’s 2025 growth forecast to just 0.75%.

As trade tensions persist, the OECD has issued a stark warning: “Significant risks remain. Further fragmentation of the global economy is a key concern. Higher and broader increases in trade barriers would hit growth around the world and add to inflation.”

With no resolution in sight, businesses, investors, and policymakers will need to navigate an increasingly uncertain economic landscape as the trade war’s ripple effects continue to spread across global markets.