Economic growth will slow this year and next as the trade war hampers development in the United States and around the world, the Organization for Economic Cooperation and Development said.According to a recent report from The New York Times, the Organization for Economic Cooperation and Development (OECD) has predicted that economic growth will slow down this year and next due to the ongoing trade war. The trade tensions between the United States and other countries are expected to hinder development not only in the US but also in other leading economies around the world.
The OECD has revised its global output forecast to 2.9 percent for this year, down from its previous estimate of 3.3 percent in 2024. The organization also lowered its growth projections for the US economy to 1.6 percent this year and 1.5 percent in 2026, a significant drop from its previous estimates of 2.2 percent and 1.6 percent, respectively.
OECD Secretary General Mathias Cormann stated that the global economy had shown resilience until the end of 2024, but the economic environment has become more challenging since then. The first quarter of this year saw a sharp decline in economic growth in the countries monitored by the organization, with a growth rate of only 0.1 percent, the slowest since the peak of the Covid-19 pandemic five years ago.
The trade war initiated by President Trump has caused uncertainty in the markets and disrupted the flow of goods and services worldwide. The constant changes in tariffs and the lack of clarity in trade policies have led to companies rushing to import goods to the US before the tariffs take effect. The report also stated that a 10 percent increase in tariffs on most of America’s trading partners would result in a 1.6 percent decrease in economic growth over two years, and a global contraction of nearly 1 percent.
The OECD report also highlighted the pressure on leading economies, such as those in the European Union, to increase military spending while also investing in the transition to a green economy. The economies of the 20 countries using the euro currency are projected to grow by 1 percent in 2025 and 1.2 percent in 2026, in line with the organization’s previous forecast. China’s economy is expected to see a growth rate of 4.7 percent this year and 4.3 percent in 2026, a slight decrease from the organization’s previous projection.
The organization’s economists have urged countries to reach agreements and resolve their differences over trade in order to mitigate the negative impact on the global economy. The trade war has not only affected economic growth but also created challenges for countries to invest in other important areas such as military spending and transitioning to a green economy.
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