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The OECD delivered a stark warning Monday about the economic impact of Trump’s tariff increases, predicting slower growth and higher inflation across North America while reducing its global economic forecast.

The Paris-based organization cautioned that American households would face significant costs, with the economic downturn potentially outweighing any revenue benefits the tariffs are intended to generate.

The global economy is expected to experience a gradual decline, with growth projected to decrease from 3.2% in 2024 to 3.1% in 2025, eventually reaching 3.0% in 2026. These figures represent a downward revision from the OECD’s December outlook, which had predicted 3.3% growth for both years.

While the overall global picture appears concerning, economic performance varies significantly between major economies. The impact of the slowdown in North America is partially offset by the resilience displayed in large emerging markets, particularly China.

The OECD emphasized that widespread tariff increases would negatively impact global business investment and drive up inflation, forcing central banks to maintain higher interest rates for an extended period.

The organization’s updated forecasts, which assume a 25 percentage point increase in tariffs between the United States and neighboring countries on nearly all imported goods starting in April, paint a concerning picture for North American economies.

For the United States, economic growth is projected to decline to 2.2% this year and further decrease to 1.6% next year, down from previous estimates of 2.4% and 2.1% respectively.

Mexico faces the most severe impact, with its economy expected to contract by 1.3% this year and an additional 0.6% next year, a significant reversal from earlier growth projections of 1.2% and 1.6%.

Canadian growth prospects have also been dramatically reduced, with expectations now set at 0.7% for both years, significantly below the previously forecast 2%.

The Euro area, currently less affected by the trade tensions, is predicted to see modest improvement with 1.0% growth this year, rising to 1.2% next year, though these figures still fall short of earlier projections.

China’s growth outlook remains relatively stable, with increased government support helping to counterbalance tariff impacts. The OECD forecasts 4.8% growth in 2025, slightly up from 4.7%, before settling at 4.4% in 2026.

The organization warned that global prospects could deteriorate further if Washington escalates the trade war by implementing broader tariff increases, with trading partners responding in kind.

According to OECD estimates, a permanent 10 percentage point increase in bilateral tariffs would reduce global growth by approximately 0.3 percentage points within two to three years, while global inflation would rise by an average of 0.4 percentage points over the initial three years.

Under such circumstances, the U.S. economy would experience substantial negative effects, with growth declining by 0.7 percentage points by the third year. American households could face costs up to $1,600 each.

The economic slowdown resulting from these tariffs would likely negate any additional revenue they generate, potentially undermining the administration’s plans for tax reductions using tariff income.