In brief
The OECD has dramatically reduced its growth forecasts for Canada and Mexico due to escalating US trade tariffs, warning of recession and sluggish growth in both nations.
The latest OECD forecast reveals that escalating trade tensions, primarily due to US President Donald Trump's tariffs, are expected to significantly impact economic growth in Canada and Mexico. Both countries are facing harsh penalties on imports, leading to a downturn predicted for their economies. The OECD has lowered its growth predictions for Canada, now expecting just 0.7% growth this year and in 2026, down from an earlier estimate of 2%. Meanwhile, Mexico's economy is projected to contract by 1.3% this year and by another 0.6% next year, a drastic shift from previous growth expectations.The US has imposed a 25% tariff on all steel and aluminum imports, as well as similar tariffs on various products from Mexico and Canada, resulting in retaliatory measures from Canada and the EU. These increased trade barriers have been linked to decreasing investments and household spending, causing the OECD to warn of potentially prolonged higher inflation rates.US growth predictions have also been adjusted, indicating a decrease from 2.4% to 2.2% for this year. The OECD’s forecasts place US growth at 1.6% for 2025. Although tariffs on Chinese goods remain, the OECD slightly upgraded its growth outlook for China to 4.8%. As trade disputes escalate, the OECD cautioned that significant risks persist and warned against further fragmentation of the global economy. The anticipated global growth is projected to slow from 3.2% in 2024 to 3.1% in 2025 because of ongoing trade conflicts, with inflation rates expected to remain higher than previously estimated. Elon Musk’s Tesla has expressed concerns that the trade war may disproportionately affect US exporters. The OECD also downgraded its UK growth forecast to 1.4% in 2025, reflecting similar economic pressures affecting global trade dynamics.
