In brief
In light of intensified trade disputes and tariffs imposed by the US, the OECD anticipates drastic reductions in growth for both Canada and Mexico, with the former's annual growth forecast slashed to an alarming 0.7% and the latter facing potential recession. The ripple effects of these tariffs impact not just these neighboring economies but threaten global growth as well.
Trade tensions, driven by escalating tariffs from the United States, are forecasted to cause considerable economic disruption in Canada and Mexico, according to the OECD's recent projections. These two countries bear the brunt of the US's heightened tariffs, notably a 25% levy on steel and aluminum imports, and a similar tariff level on various imports. The organization's downgraded outlook significantly impacts the economic landscape, with Canada’s forecast slashed from a 2% growth to a mere 0.7% this year and next. Mexico faces even grimmer prospects, with a projected contraction of 1.3% this year and a further shrinkage of 0.6% in the following year, rather than the previously anticipated growth.The OECD warned that the increasing trade barriers, coupled with “elevated geopolitical and policy uncertainty,” are detrimental to both investment and household expenditure. The looming recession in Mexico and stagnation in Canadian growth are compounded by the ongoing trade disputes, including US tariffs on Chinese goods which remain at a 20% rate. The defeat of expected economic expansion extends to the US itself, with its growth forecast decreased to 2.2% for this year and 1.6% for 2025.Despite the tariffs imposed on several nations, the OECD has slightly raised its growth forecast for the US to 4.8%. Nonetheless, it warned that such turmoil will likely elevate inflation, compelling interest rates to remain elevated longer than anticipated. The OECD anticipates world economic growth to decelerate from 3.2% in 2024 to 3.1% in 2025 as a direct result of these ongoing trade hostilities.Notably, Tesla, led by Elon Musk, has cautioned that the ongoing trade conflict may unfavorably affect US exporters, highlighting that retaliatory tariffs could amplify negative repercussions. Furthermore, the OECD has revised its growth prediction for the UK's economy down to 1.4% in 2025, down from 1.7%, indicating a broader impact of the US's trade policies on global economies.The looming question of what these elevated tariffs entail for global commerce and the length of the trade war remains urgent, with the OECD emphasizing risks surrounding economic fragmentation and its potential inflationary consequences.
