The uncertainty faced by traders around the world due to the tariff policies implemented by the US government is set to weaken global economic growth this year.
This is according to the Organization for Economic Cooperation and Development (OECD), which has forecast growth will fall from 3.3 percent last year to 2.9 percent in both 2025 and 2026. The countries at the center of the disruption - namely the US, Canada, Mexico and China - will be the most affected, with other nations seeing a smaller downward adjustment.
In the US, for example, GDP growth is expected to fall from 2.8 percent in 2024 to 1.6 percent this year and 1.5 percent in 2026. China’s growth is projected to fall from five percent in 2024 to 4.7 percent in 2025 and 4.3 percent in 2026.
However, in the euro area, growth is forecast to strengthen modestly, up from 0.8 percent in 2024 to 1.2 percent in 2026.
The OECD's Economic Outlook report highlighted "substantial barriers to trade" as one of the key drivers of this, along with tighter financial conditions, a lack of confidence and growing uncertainty.
OECD secretary-general Mathias Cormann said the global economy has moved on from a period of resilient growth and declining inflation and is now facing a more uncertain future.
He added: "Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue – keeping markets open and preserving the economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth."
The report highlighted a range of potential risks that could further hinder growth, including additional trade fragmentation as a result of new tariff hikes and retaliatory actions. This could intensify the growth slowdown and lead to significant disruptions in cross-border supply chains.
However, it also noted that a reversal of new trade barriers would boost global growth prospects and reduce inflation.