OECD Warns of Widespread Economic Downturn, Blames Protectionism

A stark warning has been issued by the Organization for Economic Co-operation and Development (OECD) regarding the trajectory of the global economy. In its latest outlook report, the 38-country group has lowered its growth forecasts, now expecting global economic expansion to shrink from 3.3% in 2024 to 2.9% in both 2025 and 2026. This downward revision from a previous 3.1% projection signals a bleaker economic landscape than previously anticipated.
The primary culprit, according to the OECD, is the rise of protectionist trade policies, particularly the tariff measures enacted by the U.S. The report explicitly states that “weakened economic prospects will be felt around the world, with almost no exception,” leading to reduced income and slower job creation. Notably, the report pinpoints the United States, Canada, Mexico, and China as key players in this projected global economic contraction.
Furthermore, the OECD report cautions that protectionism will fuel inflation, leading to increased costs for consumers. This directly challenges the stated goals of tariff policies, suggesting they may have unintended negative consequences for both domestic and international economies. The added burden of tariffs on nations with substantial government debt further compounds the risk, particularly for developing countries.
To counter these threats, the OECD recommends that central banks, such as the Bank of Canada, maintain a watchful eye on inflation and be prepared to act. While a rate hike isn’t expected immediately, the possibility of higher borrowing costs looms if inflation accelerates. The report also stresses the importance of fostering investment to revitalize economies and improve fiscal health, a challenge for governments already grappling with debt.