Trump’s Trade Wars Tip World to Slower Growth, Group Warns
OECD Secretary General Mathias Cormann by OECD
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President Donald Trump’s aggressive trade policies have abruptly set the world onto a path of slower growth and higher inflation that could worsen notably if tensions escalate, the Organization for Economic Cooperation and Development said.
The Paris-based club of 38 rich countries cut its outlook for most members and predicted the pace of global expansion to slow to 3.1% this year and 3% in 2026 as barriers restrain commerce and surging uncertainty holds back business investment and consumer spending.
Nations currently in the eye of the trade storm may see even sharper decelerations, with Canada’s growth rate tumbling to less than half the OECD’s December prediction, Mexico entering a recession, and the annual expansion in the U.S. wilting to 1.6% next year — the weakest since 2011 aside from the initial COVID pandemic hit suffered in 2020.
Increased costs of commerce will also fuel stronger inflation than expected just three months ago, requiring central banks to keep restrictive policies for longer, the OECD said. In many countries, including the U.S., core price increases will remain above policymakers’ targets in 2026.
The outlook is the most comprehensive attempt yet from an international organization to quantify the damage from a fast-evolving trade war. While Trump was expected to ratchet up tensions after taking office, the volatility and size of his threats have wrong-footed both policymakers and investors.
Last week, U.S. stocks fell into a correction with the S&P 500 plunging 10% from a peak in mid-February. Trump has acknowledged the country faces “a period of transition” due to his attempt to radically rewire global trade, but dismissed the threat of a recession and downplayed the market turmoil.
The OECD’s analysis accounts for measures already