The OECD has downgraded its global growth forecasts for 2025 and 2026, citing the impact of tariffs from the U.S. The predictions now indicate a growth of 3.1% for 2025 and 3.0% for 2026. Potential tariff increases could further harm global output, particularly affecting Mexico and the U.S., while India is forecasted to grow the fastest among major economies.
On March 17, the Organisation for Economic Co-operation and Development (OECD) announced a downward revision of its global growth forecast for the years 2025 and 2026, attributing part of this adjustment to tariff disputes initiated by U.S. President Donald Trump. The OECD’s report indicates a predicted global growth rate of 3.1% for the current year, down from a previous estimate of 3.3%. Additionally, the growth forecast for 2026 has been altered to 3.0% from an earlier projection of 3.3%.
The OECD noted, “Recent activity indicators point to a softening of global growth prospects,” citing high policy uncertainty and significant strains in the economic landscape. The organization has raised alarms about the potential for increased fragmentation within the global economy. In fact, it projects that further increases in bilateral tariffs on non-commodity imports and exports could lead to a 0.3% decline in global output by the third year.
A simulation involving a 10% tariff indicates that Mexico may endure the most severe impact, with an anticipated 1.3% decrease in growth as a consequence of the tariffs within three years of implementation. The United States is forecasted to experience a 0.72% reduction in its growth rate. The OECD suggests, “Agreements that lower tariffs from current levels could result in stronger growth,” indicating a path forward.
Despite the tariffs, India is expected to maintain the highest growth rates among major economies, with projections of 6.4% in 2025 and 6.6% in 2026 in terms of real gross domestic product. Conversely, Mexico is anticipated to experience a downturn, while Canada may exhibit negligible growth. The eurozone is projected to grow modestly at rates of 1.0% in 2025 and 1.2% in 2026.
The OECD’s revised forecasts for global economic growth highlight the adverse effects of tariff disputes initiated by the U.S. Additionally, the data underscores the importance of international trade agreements to stimulate growth. India is expected to emerge as the fastest-growing major economy, while global economic fragmentation poses a significant risk. In summary, policy decisions surrounding tariffs could heavily influence global economic performance moving forward.
Original Source: gna.org.gh
