Global economic jitters are palpable, with the Organization for Economic Co-operation and Development (OECD) downgrading its growth projections, reflecting mounting fears over the ongoing trade war. The OECD now anticipates a decline in global economic growth from 3.3% in 2024 to 2.9% in both 2025 and 2026, a clear indicator of the pervasive anxiety in financial markets.
The OECD’s latest outlook report directly attributes this dim forecast to the “challenging and uncertain environment” created by current trade policies. It warns that “weakened economic prospects will be felt around the world, with almost no exception,” leading to “lower growth and less trade [that] will hit incomes and slow job growth.” The United States, Canada, Mexico, and China are identified as key contributors to this anticipated global economic slowdown.
Furthermore, the OECD highlights that “protectionism” will put pressure on inflation, meaning costs for goods and services will rise. This inflationary trend, coupled with the potential for higher interest rates from central banks like the Bank of Canada, could further exacerbate economic jitters and uncertainty for businesses and consumers.
To navigate this period of heightened concern, the OECD advises central banks to “remain vigilant” regarding inflation. More broadly, the report advocates for increased investment to stimulate business development and improve public finances. This call for increased investment, however, comes with the caveat that governments already grappling with high debt levels may find it difficult to finance such crucial projects, intensifying the jitters.