In a recent report issued by the Organisation for Economic Co-operation and Development (OECD), the impact of U.S. President Donald Trump’s escalating trade tariffs on steel, aluminum, and other imports has been starkly illustrated. The report highlights a dramatic downturn in growth forecasts for both Canada and Mexico, thrusting them into the spotlight as the countries most affected by these tariffs.
President Trump has applied a 25% tariff on all steel and aluminum imports, alongside additional tariffs on various imports from Canada and Mexico, while also imposing a notable 20% levy on goods from China. The OECD has responded to this trade turmoil by reducing its growth forecast for Canada for this year and the next by over half. Instead of the anticipated 2% growth previously projected, Canada’s economy is now expected to increase by only a meager 0.7%.
Mexico finds itself in an even more precarious situation, with the OECD forecasting a contraction of 1.3% for 2023 and a further decline of 0.6% in 2024. Previously, Mexico was on track for mild growth at rates of 1.2% and 1.6% for those respective years. The report emphasizes that these changes reflect the harsh realities brought about by the tariffs and the consequent geopolitical tensions that are amplifying economic uncertainty.
As these tariffs are set to impact investment and household spending dramatically, the United States is also feeling the strain. The OECD has downgraded the growth forecast for the U.S. economy as well, expecting a decline from the earlier estimated growth of 2.4% to 2.2% this year, and a fall from 2.1% to 1.6% by 2025.
Moreover, the OECD warns that the impacts of the trade war could escalate inflation rates, leading to heightened interest rates that may persist longer than anticipated. The organization has expressed concern over the possibility of a fragmented global economy as higher trade barriers could have reverberating effects on worldwide economic growth, which is projected to slow down marginally from 3.2% in 2024 to 3.1% in 2025.
In addition to the economic forecasts, major U.S. exporters like Tesla have expressed fears about the trade battle’s detrimental effects on their operations and the wider market. This commentary has been echoed by discussions surrounding retaliatory tariffs announced by Canada and the EU, pitting nations against one another in an escalating trade conflict that threatens economic stability.
In summary, Trump’s tariffs are not only reshaping the economic landscape for Canada and Mexico but are also reflecting on the broader global economy, highlighting the intricate interdependencies that govern international trade and economic forecasts.