Tariffs’ True Impact on Global Economy Still Unseen, Says OECD
Despite the fact that the global economy has exhibited a larger degree of resilience than was anticipated in recent months, the Organization for Economic Cooperation and Development has asserted that it is still ready to feel a big impact from the trade restrictions that Donald Trump has put in place. The Paris-based agency, which presented fresh predictions on Tuesday, has upped its projections for global growth for the year 2025, as well as those for the majority of national economies.
The group has attributed this change to the impacts of front-loading in anticipation of the implementation of higher tariffs. The United States of America saw a great deal of investment in the field of artificial intelligence, while China benefited from the monetary backing it received. Nevertheless, the OECD made very few changes to its 2026 predictions, anticipating that the world’s economy would continue to develop at a rate of 2.9 percent in 2026, which is a slight decrease from this year’s rate of 3.2 percent. The organization also expects that the US economy will grow at a rate of 1.5 percent in 2026, which is a slowdown from the 1.8 percent growth it is currently experiencing. The reason for this slowdown is due to the increase in import charges and the heightened uncertainty in the market. The full impact of the overall effective tariff rate of 19.5 percent, which the White House established and which is the highest rate since 1933, has not yet been felt, according to officials.
Alvaro Santos Pereira, the chief economist for the Organization for Economic Cooperation and Development, made the following statement during an interview: “It’s a significant hit for the US economy, and because the US economy is such an important economy for the rest of the world, this is having implications for many countries.” Given the scale of the policy changes involved and the ambiguity surrounding their implementation, economists have found it difficult to evaluate the repercussions of Trump’s efforts to change the framework of international commerce. The Organization for Economic Cooperation and Development pointed out that, although the impact of increased goods imports is becoming less and less significant, and the effect on real activity is still to be ascertained, the consequences are already noticeable in some consumer prices and spending decisions. In addition, it made mention of a weakening of labor markets, which is characterized by an increase in the number of people who are unemployed and a decrease in the number of available positions. It also mentioned that the latest business surveys provide evidence of moderation.
Pereira stated, “We are aware of the fact that an increase in trade is beneficial for growth; therefore, it is essential that nations continue to engage in discussions and that they are able to reach agreements that will lower trade barriers.” The Organization for Economic Cooperation and Development made the announcement that it is expected that inflation will decline in the majority of major economies, which will be followed by slower growth and less pressure on employment. On the other hand, it declared that central banks should be “vigilant.” The Federal Reserve is expected to gradually reduce interest rates over the course of the coming year. This will be dependent on a number of factors, including the labor market becoming more relaxed and tariffs not triggering widespread inflation. To summarize, the organization declared that there are “significant risks” associated with its interim prognosis, which include the possibility of new trade levies or another round of price hikes.
