The OECD predicts that Canada's economy will grow by just 0.7% this year and face a recession in Mexico, which is expected to contract by 1.3%. The implications of trade tariffs extend beyond North America, influencing global inflation and economic stability.
Trade Wars: OECD Predicts Economic Struggles for Canada and Mexico
Trade Wars: OECD Predicts Economic Struggles for Canada and Mexico
Escalating trade tensions led by US tariffs pose significant risks to economic growth in Canada and Mexico, according to the OECD's latest forecast.
The Organisation for Economic Co-operation and Development (OECD) has released a grim forecast regarding the economic repercussions of escalating trade tariffs imposed by the United States under President Donald Trump. The report highlights that both Canada and Mexico are projected to be hit hardest by these changes, which also threaten to slow growth in the US economy.
The trade war has seen the US impose hefty tariffs, including a 25% levy on steel and aluminum imports from its neighbors and a similar tax on a range of goods from China. In retaliation, Canada and the European Union have introduced their own tariffs, compounding the economic strain.
According to the latest prediction by OECD, Canada will experience a significant downturn with a revised growth rate forecast of just 0.7% for this year, a drop from the previously anticipated 2%. Mexico's situation appears even more dire as it faces a projected contraction of 1.3% this year and an additional shrinkage of 0.6% next year, a stark contrast to earlier growth predictions of 1.2% and 1.6%.
The ripple effects are felt across the border, as the OECD has lowered the growth forecast for the United States to 2.2% for this year and 1.6% for 2025. Conversely, the outlook for China sees a slight improvement with a growth estimate of 4.8%.
The OECD attributed the declining forecasts to rising trade barriers that contribute to heightened geopolitical uncertainty impacting both business investment and consumer spending. It stated that continued trade tensions could further fragment the global economy, elevating inflation rates which are expected to persist longer than previously predicted.
Moreover, the OECD warns that global growth will decelerate slightly from 3.2% in 2024 to 3.1% in 2025, primarily as a fallout from trade conflicts. Inflation is forecasted to remain elevated at 3.8% this year across major economies, an adjustment from 3.5% earlier.
Amid these developments, companies like Tesla have expressed concerns regarding the detrimental effects of the trade war on US exporters, emphasizing the disproportionate impacts of retaliatory measures by other nations. Additionally, the OECD has sketched a conservative growth scenario for the UK economy, predicting a decline to 1.4% in 2025.
As the OECD cautions about significant risks looming over global economic stability, central banks worldwide may need to brace for the long-term effects of the ongoing trade disputes.
