US President Donald Trump’s escalating trade tariffs will hit world growth and raise inflation, the OECD has predicted in its latest forecast.
Canada and Mexico are forecast to see the biggest impact as they have had the harshest tariffs imposed on them, but US growth is also expected to be hit.
The OECD has more than halved its growth outlook for Canada for this year and next, while it expects Mexico to be pushed into a recession.
Trump has imposed 25% tariffs on all steel and aluminium imports. The US has also imposed 25% tariffs on other imports from Mexico and Canada – with some exemptions – and a 20% levy on Chinese goods.
The OECD expects Canada’s growth rate to slow to 0.7% this year and in 2026, compared with its previous forecast of 2% for both years.
Mexico’s economy is now forecast to contract by 1.3% this year and shrink a further 0.6% next year, instead of growing by 1.2% and 1.6% as previously expected.
Growth in the US has also been downgraded, with growth of 2.2% expected this year and 1.6% in 2025, down from previous forecasts of 2.4% and 2.1%.
The OECD said that for the world economy, growth would slow from 3.2% in 2024 to 3.1% in 2025, largely as a result of the trade tensions.
It added that growth in China, the world’s second biggest economy, is projected to slow from 4.8% in 2024 to 4.4% in 2026.
