Economic Clouds Darken: OECD Downgrades Global Growth Amidst Trade War Reality

Economic clouds are darkening across the globe as the Organization for Economic Co-operation and Development (OECD) downgrades its global growth projections, grappling with the stark reality of the ongoing trade war. The OECD now anticipates a decline in global growth from 3.3% in 2024 to 2.9% in both 2025 and 2026, a significant reduction from its earlier 3.1% estimate. This revised outlook reflects a pervasive sense of economic uncertainty.
The OECD’s latest report directly attributes this grim forecast to the “challenging and uncertain environment” fueled by current trade policies. It warns that “lower growth and less trade will hit incomes and slow job growth” across nearly all nations, emphasizing the widespread and detrimental impact of the trade conflict. The United States, Canada, Mexico, and China are identified as key contributors to this anticipated global economic slowdown.
Moreover, the OECD highlights the looming threat of inflation, predicting that “protectionism” will inevitably drive up the cost of goods and services. This inflationary pressure, coupled with high debt levels, poses a particular risk for developing nations, which may struggle with refinancing needs and increased borrowing costs. The report underscores the complex interplay of these economic challenges.
To navigate this difficult period, the OECD advises central banks to “remain vigilant” regarding inflation, even if immediate interest rate hikes are not foreseen. The report also emphasizes the crucial role of increased investment in revitalizing economies and strengthening public finances, acknowledging that governments with existing debt may face significant hurdles in funding these essential initiatives.