In a stark forecast, the OECD predicts that escalating trade tensions and tariffs will stifle growth in Canada and Mexico, with potential broadened impacts on the global economy.
Trade Turmoil: Canada and Mexico Brace for Economic Hits
Trade Turmoil: Canada and Mexico Brace for Economic Hits
As tariffs escalate under the Trump administration, Canada's and Mexico's economies face significant downturns, warns OECD.
US President Donald Trump's ongoing tariff measures are set to pose severe economic challenges for both Canada and Mexico, according to the latest projections from the OECD. As these nations brace for the impact of 25% tariffs imposed on steel and aluminum, alongside additional levies on various imports, their growth outlooks have drastically shifted.
The OECD has slashed its growth forecast for Canada to a mere 0.7% for both this year and 2026, a significant drop from its earlier projection of 2%. Meanwhile, Mexico faces the possibility of recession, with expectations of a 1.3% contraction this year and a further 0.6% decline next year, deviating from previous growth expectations of 1.2% and 1.6%.
The United States isn't exempt from adverse effects; the OECD has also downgraded its growth outlook, adjusting expectations to 2.2% for this year and 1.6% in 2025. Despite the turmoil and strained trade relationships, the organization has slightly raised its forecast for China to 4.8%.
The OECD attributes the economic downturn to rising trade barriers and increasing geopolitical uncertainties, which are negatively influencing investment and household expenditures. The report also emphasizes the potential for global inflation to rise as these trade conflicts elevate costs.
Importantly, the OECD warns of "significant risks" stemming from a fragmented global economy, asserting that additional trade barriers likely mean prolonged inflation and sluggish growth worldwide, with an anticipated slow from 3.2% in 2024 to 3.1% in 2025. Inflation is projected at 3.8% across major economies, slightly above previous estimates.
Tesla recently highlighted concerns regarding the impact of these tariffs on US exporters, stressing that they face "disproportionate impacts" from potential retaliations, further demonstrating the pervasive effects of the trade war on businesses and market dynamics.
In the context of the UK's economy, the OECD also lowered its growth forecast for 2025 to 1.4%. This revision positions it below the Bank of England's more pessimistic estimates of 0.75% growth for the same year.
Trade wars, tariffs, and their extensive repercussions continue to reverberate across global markets, leaving nations to grapple with the economic fallout.
