Trade Turmoil Predicted to Decimate Growth in Canada and Mexico

The Organisation for Economic Co-operation and Development (OECD) has issued a stark warning about the effects of trade tensions driven by US tariffs. The group predicts significant economic contractions in both Canada and Mexico due to the escalating trade dispute. Canada is anticipated to witness a mere 0.7% growth this year, drastically reduced from earlier projections of 2%. Mexico, on the other hand, is expected to experience a recession, with forecasts indicating a contraction of 1.3% for 2023 and an additional decline of 0.6% in the following year. The rising tariffs, spearheaded by the Trump administration, have also included hefty levies on imports of steel, aluminium, and goods from China, causing considerable uncertainties in investment and consumer spending across North America.

With the heightened trade barriers, the OECD has expressed concerns that global economic growth could slow further, with potential inflationary pressures leading to prolonged high-interest rates. The overall prediction for worldwide growth dips from 3.2% in 2024 to 3.1% in 2025 largely due to the trade skirmishes. Additionally, the OECD noted that other nations such as the UK may also face downgraded growth forecasts as a ripple effect of these tariffs takes hold. Tesla, among other US exporters, has expressed concerns over being disproportionately affected by retaliatory measures from other countries.

In response to these developments, Canada and the EU have initiated retaliatory tariffs, highlighting an intensifying trade conflict. While the US economy's growth has also been revised down, the OECD presents a slightly more favorable outlook for China, anticipating a growth increase to 4.8%. As the trade war continues to unfold, significant risks threaten the stability of the global economy, with the OECD urging caution moving forward.