An IMGW News Report
The world economy, still nursing the scars of Covid-19, now faces a new – and self-inflicted – fever. According to the OECD’s latest projections, global growth in 2025 and 2026 will slip to just 2.9%, the weakest since the pandemic. The culprit this time? President Donald Trump’s resurgent tariff onslaught.
“Trump’s “liberation day” tariff announcements have pushed America’s effective average tariff rate above 15%, its highest level since the Second World War”
No one expected a second Trump presidency – still technically unofficial – to cast such a long shadow. But it has. His tariff hikes, including a doubling of steel and aluminium levies to 50%, have sent ripples across financial markets and boardrooms alike. The Paris-based OECD warns that the trade war redux is exerting a Covid-level dampening effect on investment, trade flows, and confidence.
The OECD has revised down growth forecasts for three-quarters of the G20, including the US, China, Japan, the UK and India. America is projected to slow from 2.8% last year to just 1.6% in 2025. China’s growth will also lose steam, falling to 4.7% next year and 4.3% in 2026. Europe fares little better, with the Eurozone predicted to grow by a meagre 1.2% in 2026.
What distinguishes this downturn is its provenance. Trump’s “liberation day” tariff announcements have pushed America’s effective average tariff rate above 15%, its highest level since the Second World War. While some measures were later softened, the broader tone remains belligerent, targeting allies and rivals alike. US inflation is expected to rise to 4% by end-2025, forcing the Federal Reserve to maintain higher rates longer.
Álvaro Pereira, the OECD’s chief economist, cautions that dismantling trade barriers is now urgent. “Otherwise,” he warned, “the growth impact is going to be quite significant.” Indeed, sluggish investment – despite rising profits – is the other red flag: firms are prioritising shareholder returns over fixed-capital investment.
With fiscal pressures mounting and markets edgy, policymakers now face an uneasy question: can an aversion to globalism do as much damage as a virus? The OECD’s figures suggest it already has.
