Trade War to Slow Growth in Canada and Mexico, Reports BBC
The ongoing trade tensions sparked by US President Donald Trump’s tariffs are expected to hurt global economic growth and push up prices, according to the latest forecast from the Organisation for Economic Co-operation and Development (OECD).
The BBC reports that Canada and Mexico will feel the biggest impact, but the US and other countries will also face challenges.
The OECD has significantly lowered its growth predictions for Canada and Mexico. Canada’s economy is now expected to grow by just 0.7% this year and next, down from the previous forecast of 2%. Mexico, on the other hand, is predicted to fall into a recession, with its economy shrinking by 1.3% this year and 0.6% next year.
The US has imposed heavy tariffs on imports, including a 25% tax on steel and aluminium from all countries, as well as additional tariffs on goods from Mexico, Canada, and China. In response, Canada and the European Union have announced their own tariffs on US products.
The OECD warns that these trade barriers, along with rising uncertainty, are hurting investment and consumer spending. As a result, global growth is expected to slow from 3.2% in 2024 to 3.1% in 2025. The trade war is also likely to push inflation higher, meaning interest rates could stay elevated for longer.
While the US economy is also expected to slow, with growth downgraded to 2.2% this year and 1.6% in 2025, China’s growth forecast has been slightly raised to 4.8%. The OECD notes that further escalation of trade tensions could harm the global economy even more.
The BBC highlights that US companies, like Elon Musk’s Tesla, are also worried about the impact of the trade war. In a letter to US trade officials, Tesla warned that American exporters could suffer if other countries retaliate with their own tariffs.
The UK is not immune to these challenges either. The OECD has cut its growth forecast for the UK to 1.4% in 2025 and 1.2% in 2026, though this is still more optimistic than the Bank of England’s recent prediction of just 0.75% growth in 2025.
This forecast underscores the far-reaching effects of the trade war, which is not only hurting the economies directly involved but also creating uncertainty for businesses and consumers worldwide.
As the OECD warns, further fragmentation of the global economy could lead to even slower growth and higher prices.
Credit: This story is based on reporting by the BBC.
https://www.bbc.com/news/articles/c9wpq0g10xjo