OECD Adjusts Global Growth Forecast Due to Impact of US Tariffs
The OECD has lowered its global growth forecasts for 2025 and 2026 due to tariffs imposed by the United States, predicting a 3.1% growth for this year. Mexico may face significant declines, while India is expected to grow the fastest. The report highlights ongoing policy uncertainties and risks within the global economy.
The Organisation for Economic Co-operation and Development (OECD) has revised its global growth projections for 2025 and 2026 downwards, attributing part of this adjustment to the tariffs implemented during the trade dispute initiated by former President Donald Trump. The OECD’s latest report indicates an expected global growth rate of 3.1% for this year, a decrease from the earlier forecast of 3.3%. In addition, the projected growth for 2026 has been updated to 3.0%, also lower than the initially estimated 3.3%.
According to the OECD, activity indicators are signaling a downturn in global growth prospects. The report highlights heightened policy uncertainty and ongoing significant risks, expressing concern regarding the potential fragmentation of the global economy. They cautioned that if tariffs are increased on all non-commodity imports and exports involving the United States, global output could decline by approximately 0.3% within three years.
Simulations indicate that a 10% tariff could significantly affect economies, with Mexico experiencing a projected 1.3% contraction in growth, while the United States might see a 0.72% decrease. The OECD mentioned that trade agreements reducing tariffs could stimulate stronger economic growth moving forward.
Despite the adverse effects of tariffs, the OECD expects India to maintain the highest growth rate among major economies, predicting real GDP increases of 6.4% and 6.6% for the years 2025 and 2026 respectively. Conversely, Mexico is anticipated to face a decline, while Canada and the Eurozone are expected to experience modest growth, with the Eurozone forecasted to grow by 1.0% and 1.2% in 2025 and 2026, respectively.
In summary, the OECD has downgraded its global growth forecasts due to the economic impact of tariffs initiated by the United States. While a reduction in tariffs could bolster growth, nations like India are expected to outpace others in economic expansion, contrasting with Mexico’s predicted decline. The report underscores the need for stability in trade policies to foster a more positive economic outlook.
Original Source: gna.org.gh
