The global economy is facing a series of economic shocks, with the Organization for Economic Co-operation and Development (OECD) warning of a domino effect stemming from the ongoing trade war. The OECD has significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, illustrating how initial trade tensions are causing wider repercussions.
The OECD’s latest outlook report states unequivocally that “weakened economic prospects will be felt around the world, with almost no exception.” It predicts that “lower growth and less trade will hit incomes and slow job growth,” signaling a pervasive negative impact on livelihoods globally. The United States, Canada, Mexico, and China are specifically identified as major contributors to this anticipated global economic decline, highlighting the interconnectedness of the global economy.
Further complicating the picture, the OECD warns that “protectionism” will put pressure on inflation, causing costs for goods and services to rise. This inflationary trend, combined with already high debt levels, poses a severe risk for developing nations, which may struggle with refinancing needs and increased borrowing costs, creating a cascading effect of economic distress.
In response to this grim outlook, the OECD advises central banks to “remain vigilant” regarding inflation, even if immediate interest rate hikes are not expected. Crucially, it also advocates for increased investment to revive economies and improve public finances, though it acknowledges the difficulty for governments already burdened by debt to finance such crucial initiatives that could buffer against these economic shocks.