Trade War’s Ripple Effect: OECD Sees Lower Growth, Less Trade, and Fewer Jobs

The ripple effect of the ongoing trade war is set to hit the global economy hard, with the Organization for Economic Co-operation and Development (OECD) projecting lower growth, less trade, and fewer jobs. The OECD has significantly lowered its global economic growth projections, now expecting a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, a direct consequence of the escalating trade tensions.
The OECD’s latest outlook report warns that “weakened economic prospects will be felt around the world, with almost no exception.” It explicitly states that “lower growth and less trade will hit incomes and slow job growth,” indicating a broad and detrimental impact across various sectors and nations. The United States, Canada, Mexico, and China are highlighted as major contributors to this anticipated global economic slowdown.
Beyond the direct impact on trade and growth, the OECD also warns that “protectionism” will put pressure on inflation, leading to higher costs for goods and services. This inflationary trend, coupled with the potential for higher interest rates from central banks like the Bank of Canada, could further burden consumers and businesses. The report underscores the complex and interconnected challenges facing the global economy.
To mitigate these widespread negative effects, the OECD suggests that central banks “should remain vigilant” regarding inflation. More broadly, the report advocates for increased investment to stimulate business development and improve public finances. This call for increased investment, however, comes with the caveat that governments already grappling with high debt levels may find it difficult to finance such crucial projects.