Escalating Tariffs Threaten Economic Growth in North America

Recent forecasts from the OECD indicate a significant downturn for Canadian and Mexican economies due to escalating trade tariffs imposed by the United States, particularly under President Donald Trump. As a result, Canada’s growth outlook has been cut in half, now projected at merely 0.7% for the current year and 2026, a stark contrast to the previously anticipated 2%. Mexico faces an even steeper decline, predicted to contract by 1.3% this year and another 0.6% in the following year, shifting from earlier growth forecasts of 1.2% and 1.6%, respectively.

The major cause of this economic regression stems from the 25% tariffs on steel and aluminium imposed by the US, along with additional tariffs on selected imports from Canada and Mexico, which have prompted retaliatory measures from both Canada and the European Union. The OECD highlights the detrimental effects of increased trade barriers and overall geopolitical uncertainty on investment and consumer spending, which further compounds the economic struggle facing North America.

While the US growth forecast has been downgraded to 2.2% for this year and 1.6% in 2025, slightly up from expectations for China, the trade conflict is anticipated to push global inflation higher, leading to prolonged higher interest rates. The OECD warns of considerable risks ahead, especially concerning the fragmentation of the global economy as trade tensions persist. Notably, major companies like Tesla have voiced concerns over the adverse effects of these tariffs on US exports, emphasizing the potential for a downward spiral in international trade relations.

Globally, the OECD forecasts a dip in economic growth from 3.2% in 2024 to 3.1% in 2025 owing to these rising tensions, highlighting a broader economic landscape impacted by ongoing trade disputes.