BY: Shatha kalel
The Organisation for Economic Co-operation and Development (OECD) has issued a warning that rising global trade barriers, particularly those proposed by former U.S. President Donald Trump, are threatening to unravel global economic recovery. According to the OECD’s latest interim economic outlook, increased tariffs and geopolitical tensions are already slowing economic activity and could lead to long-term damage.
Global Growth Forecasts Downgraded
Global GDP growth is now expected to reach 3.1% in 2025, down from an earlier forecast of 3.3%.
Growth in 2024 stood at 3.2%, but future expansion is expected to slow due to trade restrictions and declining investor confidence.
The OECD highlighted that trade fragmentation, if escalated, could disrupt global supply chains, increase consumer prices, and reduce living standards worldwide.
North American Economies Most at Risk
In a scenario where Trump reinstates sweeping tariffs — including a 25% duty on all imports from Canada and Mexico starting in April — the OECD projects:
United States:
Growth reduced from 2.5% to 2.2% in 2025, and further to 1.6% in 2026.
A 10% blanket tariff on all U.S. imports could shrink U.S. GDP by 0.7% over three years.
Inflation could rise by 0.7 percentage points annually, pushing up costs for households and businesses.
Mexico:
Projected to enter a deep recession with -1.3% growth in 2025, and -0.6% in 2026.
Heavily dependent on exports to the U.S., Mexico would face a significant drop in demand.
Canada:
Forecasted growth nearly halved, due to its open economy and high trade exposure.
Economic activity would slow sharply, and inflationary pressures would grow.
UK and EU Impact
The OECD downgraded UK growth in 2025 to 1.4%, down 0.3 percentage points, and to 1.2% in 2026.
The European Union is also vulnerable, particularly in sectors exposed to global supply chains.
UK Chancellor Rachel Reeves noted that growing trade instability shows the need for a “new era of stability and resilience.”
What’s at Stake: Rising Protectionism
According to the OECD:
“Further fragmentation of the global economy is a key concern. Higher and broader increases in trade barriers would hit growth and add to inflation.”
In a hypothetical scenario where all U.S. imports face a 10% tariff, and trading partners retaliate with matching measures:
Global output could fall 0.3% within three years.
Consumer prices would rise, affecting cost of living and weakening consumer confidence.
Investment and productivity would decline across both developed and developing economies.
OECD Policy Recommendations
To prevent this scenario, the OECD advises that:
Governments must resolve trade concerns cooperatively through the multilateral trading system.
Countries should avoid unilateral tariff hikes and strengthen global economic ties to reduce uncertainty.
Protecting vulnerable economies through fair resource allocation and open market access is critical.
Summary
Trump’s tariff policies are reshaping global trade and could trigger recession-like conditions in several major economies.
North America is especially exposed due to interdependence between the U.S., Mexico, and Canada.
Global institutions are urging for cooperation over confrontation, warning that rising protectionism threatens not just growth, but economic stability, inflation control, and equity.
Economic Studies Unit / North America Office
Al-Rabetat Center for Research and Strategic Studies