OECD Forecasts Recession in Mexico and Significant Slowdown for Canada Due to Tariffs
The Organisation for Economic Co-operation and Development (OECD) has warned that the escalating trade conflict, particularly the tariffs imposed by US President Donald Trump, will have severe consequences on global growth and inflation. Canada and Mexico are expected to bear the brunt of these disruptions due to the harsh tariffs imposed on them.
The OECD has drastically reduced its growth projections for Canada, forecasting a mere 0.7% growth in 2025 and 2026, down from a previous estimate of 2%. Mexico, on the other hand, is projected to enter a recession, with a contraction of 1.3% in 2025, followed by another 0.6% decline in 2026, compared to earlier expectations of growth.
The US, which has placed a 25% tariff on steel and aluminium imports, along with other tariffs on Canadian and Mexican goods, will also experience a slowdown. The OECD revised its forecast for the US, projecting growth of 2.2% in 2025 and 1.6% in 2026, down from earlier projections of 2.4% and 2.1%, respectively.
Despite the ongoing trade dispute with China, the OECD slightly raised its forecast for the Chinese economy, expecting growth of 4.8%. However, the global economy will still be affected, with the OECD predicting a slowdown in worldwide growth, from 3.2% in 2024 to 3.1% in 2025.
The OECD also highlighted the rising inflation driven by the trade war, warning that this could lead to higher interest rates for an extended period. The global fragmentation caused by the ongoing trade tensions could also result in broader economic instability.
Tesla, the electric car giant led by Elon Musk, has already raised concerns, warning that the trade war could harm US exporters. The company stressed that retaliatory tariffs could expose US businesses to disproportionate challenges.
The OECD’s forecast for the UK also shows a downward revision, with expected growth of just 1.4% in 2025, down from the previous forecast of 1.7%. The UK’s growth projection for 2026 has also been reduced to 1.2%. However, this outlook remains more optimistic than that of the Bank of England, which recently slashed its 2025 growth forecast to 0.75%.
