The OECD downgraded world GDP projections for this year and next, with America’s neighbours Mexico and Canada, led by Mark Carney (pictured) hardest hit
The global economy is ‘steering through uncertainty’ as Donald Trump’s trade wars weigh on growth and threaten to reawaken the spectre of inflation, the Organisation for Economic Co-operation and Development warned yesterday.
In its latest forecast, the Paris-based institution downgraded world GDP projections for this year and next, with America’s neighbours Mexico and Canada hardest hit.
Both countries have had swingeing 25 per cent tariffs imposed on them by the US President – a blow which is expected to send Mexico into recession and significantly dent Canada’s growth.
Mexico’s economy is expected to shrink by 1.3 per cent this year and 0.6 per cent in 2026.
Canada is forecast to record growth of just 0.7 per cent, rather than 2 per cent, in each year.
Trump dump: The OECD downgraded world GDP projections for this year and next, with Mexico and Canada, led by Mark Carney (pictured) hardest hit
Some of the pain will be felt by the United States too, where growth has been downgraded from 2.4 per cent to 2.2 per cent for this year and from 2.1 per cent to 1.6 per cent for 2026.
But the OECD is not expecting the ‘Trumpcession’ that some fear for the US economy as tariffs push up prices and supply chains that criss-cross the continent are scrambled.
The downgrade for Canada presents a headache for the country’s new prime minister Mark Carney, the former Bank of England governor who visited London yesterday to meet the King.
In Britain the outlook has also been downgraded, largely because of the stagnant growth performance since Labour took office in July.
The UK forecast for 2025 was downgraded from 1.7 per cent to 1.4 per cent and for next year from 1.3 per cent to 1.2 per cent.
In the eurozone, the economy is set to grow by 1 per cent this year, down from 1.3 per cent, and by 1.2 per cent in 2026, down from 1.5 per cent.
Overall, the global economy is expected to grow by 3.1 per cent this year, down from a previously forecast 3.3 per cent, and by 3 per cent in 2026, down from 3.3 per cent.
OECD secretary general Mathias Cormann said recent data pointed to lower business and consumer confidence in several major economies.
‘Indicators of economic and trade policy uncertainty have risen sharply to very high levels,’ he added.
Cormann said of the downgrade for global growth: ‘In part, this reflects the imposition, or threat, of new tariffs and the associated rise in policy and geopolitical uncertainty.
Further risks could be posed if the tariff war spirals, creating yet more ‘trade fragmentation’ – weighing even heavier on growth and pushing up prices.
More upward pressure on inflation could also put pressure on central banks to impose higher interest rates than would otherwise be the case.
OECD chief economist Alvaro Santos Pereira said:‘We are steering through uncertainty.’
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