The ongoing trade war is threatening productivity and living standards worldwide, a dire warning from the Organization for Economic Co-operation and Development (OECD) in its latest global economic outlook. The OECD has significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, illustrating a broad deterioration.
The OECD’s latest outlook report states unequivocally that “weakened economic prospects will be felt around the world, with almost no exception.” It explicitly links this to “sluggish investment,” which has “lowered growth, productivity, and living standards,” signaling a systemic decline exacerbated by the trade conflict. The United States, Canada, Mexico, and China are identified as major contributors to this anticipated global economic contraction.
Adding to the concerns, the OECD warns that “protectionism” will lead to increased inflation, causing costs for goods and services to rise. This inflationary pressure, combined with already high debt levels, poses a severe risk for developing nations, which may struggle with refinancing needs and increased borrowing costs, further impacting living standards.
In response to this grim outlook, the OECD advises central banks to “remain vigilant” regarding inflation, even if immediate interest rate hikes are not expected. Crucially, it also calls for governments to “work together to tackle uncertainty and pursue reforms to foster growth and jobs,” emphasizing the need for collaborative action to reverse the negative trends affecting productivity and living standards.