OECD: Canada and Mexico’s economic growth will slow down
The new US administration has tightened its trade policy, leading to changes in the global market. The imposition of higher tariffs is putting significant pressure on the growth of the Canadian economy. This country has faced the most significant trade restrictions. Such measures will also have a negative impact on the Mexican economy, increasing the risk of recession.
OECD (Organisation for Economic Co-operation and Development) has revised its forecast for Canada significantly downwards. Economic growth is expected to be almost halved in 2025 and 2026. As for Mexico, its economy will enter recession. At the same time, the restrictions imposed are expected to influence the US economy.
Impact of trade duties on countries
The reason for such changes was the innovations of the American president:
1. The White House has imposed tariffs of 25% on all imports of steel and aluminium.
2. Imports of other products from Mexico and Canada are subject to 25% tariffs.
3. Chinese goods are subject to a 20% tariff.
This stance by the Trump administration has forced Canada and the European Union to impose retaliatory trade tariffs. As a result, the global market is experiencing geopolitical uncertainty and tensions between countries. Forecasts suggest that global economic growth could slow and inflation could rise. In addition, analysts expect a decline in investment and an increase in household spending.
OECD presented the following forecasts for a number of countries:
1. Canada’s economy will grow by 0.7% in 2025 and 2026. Previously, analysts had expected growth of 2%.
2. Mexico’s GDP will shrink by 1.3% in the current period. Next year, the economy will contract by 0.6%.
3. Expectations for the US economy in 2025 are lowered from 2.4% to 2.2%. GDP will grow by 1.6% in the next period.
4. The UK economy is expected to grow by 1.4% in 2025. Analysts forecast growth of 1.2% in the next period.
5. The Chinese economy is expected to grow by 4.8% in 2025.
Changes in trade relations will push up inflation rates. This, in turn, will slow down the process of lowering interest rates. Interest rates may remain high for longer than previously thought.
Forecasts for the global economy
One of the main risks identified by analysts is the fragmentation of the global economy. Higher trade barriers will affect processes around the world and lead to higher inflation. The global economy is forecast to grow by 3.1% in 2025. However, the rate of price increases will be lower than previously expected. Inflation in the world’s twenty largest economies will reach 3.8%.
New trade tariffs are also putting pressure on US exporters. Tesla has filed an official letter outlining the risks to its business. Other US companies are also feeling the negative impact of retaliatory tariffs.
