Watch Out, World! OECD Warns Sluggish Growth Ahead
International economic growth outlook gets dimmed due to escalating trade conflicts. - Global economic growth forecast revised downward due to escalating trade conflicts.
Warning Bells
The Organisation for Economic Co-operation and Development (OECD) is considering some serious storm clouds on the economic horizon. The international organization believes that looming trade barriers, escalating trade conflicts, tightening financial conditions, eroding trust, and ever-increasing political uncertainties will take a heavy toll on economic growth.
For Germany, the organization predicts a modest growth of 0.4% this year, expectations that could edge up to 1.2% by 2026. The United States, on the other hand, is projected to experience only 1.6% growth in 2025 – previously forecasted at 2.2% – and a further dip to 1.5% in 2026.
President Donald Trump has been an advocate for stricter trade policies since the start of his second term in January. These moves have disrupted global supply chains and the stock market. In a post on his online network, Truth Social, he stated before the OECD report's release: "It's our economy that's booming due to tariffs!"
A ministerial-level council meeting at the OECD will take place in the beautiful city of Paris on Tuesday and Wednesday. German Federal Minister of Economics, Katherina Reiche, will be in attendance, along with representatives from the United States and European Union. The topic of tariffs is expected to be a key discussion point on the event's sidelines.
"Governments must cooperate to tackle the issues in the global trading system and work towards maintaining market access and upholding the benefits of rule-based global trade through dialogue," urged OECD Secretary-General Mathias Cormann.
Key Economies:- USA- Germany- Global
Brace Yourself, Economy!
Although the OECD focuses on its projection for 2025 and 2026, it's crucial to remember that the United States is expected to face a significant slowdown from its 2.8% growth in 2024, down to 1.6% in 2025 and 1.5% in 2026[1][4][5]. Germany, as part of the euro area, predicts a modest strengthening of growth, but with GDP growth expected to rise from 0.8% in 2024 to 1.0% in 2025 and 1.2% in 2026[1].
In terms of other significant economies, Canada is forecast to experience a slight decline in GDP growth from 1.5% in 2024 to 1% in 2025[5]. Mexico's growth is expected to plummet from 1.5% in 2024 to 0.4% in 2025[5]. Meanwhile, China's growth rate will moderate from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026[1][5].
The global economy is expected to slow considerably, with a 3.3% growth rate in 2024 dropping to only 2.9% in both 2025 and 2026, primarily caused by increased trade barriers and policy uncertainty[1][2]. Additionally, escalating inflation pressures are becoming a concern, largely due to higher trade costs, although lower commodity prices are projected to mitigate the effect[1]. Investment remains weak, further challenging potential output growth[2][3].
- The OECD warns that escalating trade conflicts, tightening financial conditions, eroding trust, and increased political uncertainties could result in fewer exchanges of information among business, finance, and politics sectors, especially in key economies like the USA, Germany, and the Global economy.
- The upcoming ministerial-level council meeting at the OECD in Paris, attended by representatives from the US, Germany, and the EU, will likely discuss the impact of tariffs on global trade and economics, including the potential repercussions of reduced exchanges of information in the business, finance, and politics sectors.
