The ongoing trade war initiated by U.S. President Donald Trump’s tariff policies is causing concern among experts, who warn that it could significantly affect economies worldwide. A recent report from the Organization for Economic Co-operation and Development (OECD) paints a grim picture of the global economic landscape and suggests ways to stimulate growth.
The OECD, which consists of 38 member countries, has revised its economic forecast downward. They now predict global economic growth will drop from 3.3 percent in 2024 to 2.9 percent this year and in 2026. This is a decline from earlier projections made in March, which estimated growth at 3.1 percent for this year and next.
The report highlights that the repercussions of weakened economic conditions will be felt nearly everywhere. It states, "Lower growth and less trade will hit incomes and slow job growth." Among the countries expected to contribute most to this decline are the United States, Canada, Mexico, and China.
The OECD also pointed out that protectionist measures, like tariffs, may lead to increased inflation, raising the costs of goods and services. This could undermine Trump’s goal of boosting domestic production by making imported goods more expensive.
The report echoes warnings that have been circulating for months. TD Bank has suggested that Canada could slip into a recession this year unless policy changes can alleviate the negative effects of the tariffs. When inflation rises too high, central banks often respond by increasing interest rates, which can lead to higher costs for consumers. The Bank of Canada has already raised rates in response to inflation that surged following the COVID-19 pandemic.
On the other hand, the OECD emphasizes the importance of investment in fostering economic recovery. It suggests that countries should focus on sustainable public debt and work together to create conditions that encourage business growth.
Prime Minister Mark Carney has been proactive in addressing these challenges. He has campaigned to strengthen the Canadian economy amidst the trade war and is working to ease interprovincial trade barriers. This aims to help provinces and territories collaborate more effectively, particularly in the energy sector.
As the situation evolves, experts stress the need for governments to remain vigilant and responsive to economic changes. The OECD’s report serves as a call to action, urging nations to pursue reforms that will support growth and job creation, ultimately aiming to stabilize the global economy in these uncertain times.