In the first attempt by global economists to forecast the damage inflicted by President Donald Trump’s tariff policies, the Paris-based Organization for Economic Cooperation and Development (OECD) has warned that the protectionist trade measures are significantly slowing economic growth projections around the world, notably in Canada and Mexico.
“If the announced trade policy actions persist, as assumed in the projections, the new bilateral tariff rates will raise revenues for the governments imposing them but will be a drag on global activity, incomes and regular tax revenues,” the OECD said in its latest quarterly report. “They also add to trade costs, raising the price of covered imported final goods for consumers and intermediate inputs for businesses.”
Global GDP growth is projected to moderate from 3.2% in 2024, to 3.1% in 2025 and 3.0% in 2026, with higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending.
Annual GDP growth in the United States is projected to slow from its strong recent pace, to be 2.2% in 2025 and 1.6% in 2026. Euro area GDP growth is projected to be 1.0% in 2025 and 1.2% in 2026, as heightened uncertainty keeps growth subdued. Growth in China is projected to slow from 4.8% this year to 4.4% in 2026.
Inflation is projected to be higher than previously expected, although still moderating as economic growth softens. Headline inflation is projected to fall from 3.8% in 2025 to 3.2% in 2026 in the G20 economies. Core inflation is now projected to remain above central bank targets in many countries in 2026, including the United States.
In the budding trade war, the OECD sees Canada and especially Mexico faring worse than the United States.
Canadian GDP growth slipping to O.7%
The OECD estimates that Canada’s economic growth will be just 0.7% this year and next – far less than the prediction of 2% growth in its December report. And Mexico’s economy is expected to contract 1.3% this year and 0.6% in 2026 – compared to a previous report predicting a 1.2% growth in 2025 and 1.6% growth in 2026.
These projections are based on an assumption that bilateral tariffs between Canada and the United States and between Mexico and the United States are raised by an additional 25 percentage points on almost all merchandise imports from April. Activity would be stronger and inflation lower in all three economies if these tariff increases were lower or confined to a smaller range of goods, but global growth would still be weaker than previously expected.
Meanwhile. speaking to reporters aboard Air Force One late Sunday, Mr. Trump reiterated that the 25% tariffs on all steel and aluminum imported into the U.S. that went into effect last week are here to stay. He further stated that reciprocal and sectorial tariffs will kick in on April 2, which he described as a “liberating day.”
(Cover photo from OECD report)