In the trade war, OECD lowers its global economic growth forecast – countries
The current trade war triggered by the tariff policy of U.S. President Donald Trump is expected to have a wide range of impacts around the world, including its impact on economic growth and labor markets, and a new report further introduces the warning.
The Organization for Economic Cooperation and Development’s latest outlook report outlines its fuzzy forecasts for global economies and key areas that help restore growth.
Compared with previously released reports, the 38-country group changed its outlook to reflect the expected pathways of the global economy than expected.
“In this challenging and uncertain environment, we lowered our growth forecasts,” the report said. “Economic outlooks around the world will weaken with few exceptions. Reduced growth and less trade will generate slow growth in income and employment.”
The OECD now says it expects economic growth to fall from 3.3% in 2024 to 2.9% this year and decline in 2026.
In the last report in March, growth is expected to be 3.1% this year and next year.
Among the countries highlighted, the United States, Canada, Mexico and China are expected to be the biggest contributors to the global economic decline.
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The OECD issued another report on May 26, which included a Canadian economic survey, which said that although economic declines will decline this year, there may be no recession.
The report said “protectionism” will put pressure on inflation – meaning the costs of goods and services will rise.
This shows that Trump’s goal is to provide more goods and services to Americans in the United States by imposing tariffs on imports from other countries, which may have a negative impact on themselves and the global economy.
Warnings from the global economy have been reverberating for months as the trade war develops, and TD Bank says Canada will be in a recession this year unless government policies can mitigate Trump’s tariff losses.
When inflation is too high, central banks usually offset these price pressures by raising interest rates, which could mean that many people are more costly per month.
Banks in Canada have reached a height of years since 2022, which is the popularity of Covid-19-19.
The OECD recommends that central banks like Bank of Canada “should be vigilant” in response to inflationary pressures.
On Wednesday, Canadian banks will enact monetary policies, and although interest rates are not expected to increase this time, if inflation does surge in the near future, it is possible to resume higher borrowing costs again.
If government debt is deeply debtable, these tariffs pose additional risks to developing countries.
“High debt levels and stricter financial situations pose special risks to developing countries, many of which have huge debt refinancing needs in the near future,” the OECD said.
The ultimate recommendation outlined in the OECD report is to increase investment, which will lead to stronger business development, which may make funding future projects more difficult if the government is heavily in debt.
“Increasing investment will help restore our economy and improve public finances.”
Prime Minister Mark Carney ran during the April general election, planning to join the Canadian economy in the face of a trade war and increase spending to help diversify trading partners outside the United States.
Another way Carney has been working to mitigate the losses of the trade war is to make it easier for provinces and territories to do business with each other, first of all, to eliminate the barriers to inter-provincial trade under federal norms.
The Prime Minister met with the provincial prime minister on Monday to discuss the changes, including the energy sector, although the meeting showed that the Prime Minister felt more work needed.
“Slow investment reduces growth, productivity and living standards,” the OECD report said, adding: “Governments should work together to address uncertainty and reform to promote growth and employment.”
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