Trade Tariffs to Devastate Economic Growth in Canada and Mexico

According to the OECD’s latest predictions, Canada and Mexico are facing severe economic downturns due to escalating trade tariffs, affecting growth estimates not only for them but also for the United States.

The Organization for Economic Cooperation and Development (OECD) has issued a stark warning regarding the negative consequences of escalating trade tariffs imposed by the United States, particularly affecting its neighbors, Canada and Mexico. This move is expected to significantly decrease growth rates and inflate prices across the globe.

The OECD's revised growth forecasts reveal that Canada’s economy is now estimated to grow by merely 0.7% in 2023 and 2026, substantially lower than the previous 2% expectation. Mexico's situation is even more alarming, as economists now predict a contraction of 1.3% for this year and a further decrease of 0.6% next year—revising previous estimates that anticipated modest growth.

The tariffs include a sweeping 25% on all steel and aluminum imports, as well as on specific imports from Canada and Mexico. Following the implementation of these tariffs, both Canada and the European Union have retaliated with their counter-tariffs, compounding the situation.

The OECD highlighted that the additional trade barriers, along with rising geopolitical tensions, are stifling both investment and consumer spending. While U.S. growth estimates have also seen a decline, it is still moderately optimistic at 2.2% for this year, down from earlier projections.

Conversely, the OECD slightly raised its growth forecast for China to 4.8%, signaling uneven impacts from the ongoing trade disputes. The forecast for the world economy indicates a slowdown in growth from 3.2% in 2024 to 3.1% in 2025, driven largely by these trade tensions.

Inflation rates are also expected to rise, currently projected at 3.8% for 2023, necessitating prolonged higher interest rates. The OECD cautioned that significant risks remain, including the potential fragmentation of the global economy due to tariff expansion.

Furthermore, companies like Tesla are raising concerns over how these tariffs may adversely impact U.S. exporters, making them vulnerable to retaliatory actions. The OECD has also downgraded the UK's growth projections, which now reflect a less optimistic outlook than previously stated by the Bank of England.

As trade tensions escalate, the world economy braces for a turbulent future, with Canada and Mexico at the forefront of this unfolding crisis.