Economic Ice Age Ahead? OECD Projects Stagnant Growth Amidst Trade War

The Organization for Economic Co-operation and Development (OECD) has delivered a chilling forecast for the global economy, projecting a significant slowdown in growth due to the ongoing trade war. The 38-member international organization has lowered its global growth projections to 2.9% for both 2025 and 2026, a marked decrease from the 3.3% observed in 2024 and the 3.1% previously estimated for the coming years. This revised outlook paints a grim picture of global economic stagnation.
The OECD report directly links this downgrade to the “challenging and uncertain environment” created by current trade policies, particularly those involving tariffs. The organization anticipates that “lower growth and less trade will hit incomes and slow job growth” across the globe. Key economies, including the United States, Canada, Mexico, and China, are identified as major contributors to this anticipated worldwide economic deceleration.
One critical warning from the OECD is the impending rise in inflation caused by protectionism. The report suggests that attempts to boost domestic production through tariffs will paradoxically lead to higher costs for consumers. This inflationary pressure is particularly dangerous for developing nations, many of which are burdened by high levels of public debt and face significant refinancing needs in the near future.
In response to these challenges, the OECD advises central banks, such as the Bank of Canada, to “remain vigilant” regarding inflation. While immediate interest rate hikes may not be on the horizon, the possibility of higher borrowing costs returning is a serious concern. The report also highlights the necessity of boosting investment to invigorate economies and improve public finances, acknowledging that highly indebted governments face a delicate balancing act in funding such initiatives.