Canada's and Mexico's economic outlooks have taken a hit due to escalating U.S. trade tariffs, with fears of recession looming for Mexico and reduced growth forecasts for Canada.
Trade Turmoil: OECD Predicts Economic Slowdown Ahead for Canada and Mexico
Trade Turmoil: OECD Predicts Economic Slowdown Ahead for Canada and Mexico
Expert Analysis on Impact of U.S. Tariffs on North American Economies
In a stark forecast, the Organization for Economic Cooperation and Development (OECD) has warned that the ongoing trade tensions, primarily fueled by U.S. President Donald Trump's tariffs, will significantly hinder growth prospects for North American economies, particularly Canada and Mexico. The OECD projects a notable reduction in growth estimates, indicating that both nations will bear the brunt of these financial strains.
Under the new outlook, Canada’s economy is now anticipated to expand by a meager 0.7% this year and in 2026, a sharp decline from previous forecasts that expected a growth rate of 2% for the same periods. Meanwhile, Mexico faces the dire prospect of a recession, with projections showing a contraction of 1.3% this year, followed by an additional shrinkage of 0.6% the next year, straying far from earlier expectations of growth.
The imposition of a 25% tariff on all steel and aluminum imports from Canada and Mexico, along with additional tariffs on various goods from these countries, is cited as a primary driver for this anticipated economic downturn. In retaliation, Canada and the European Union have begun to announce counter-tariffs, intensifying an already fraught economic landscape.
The report also indicates that U.S. growth will not remain unscathed, with forecasts downgrading growth to 2.2% this year and 1.6% in 2025, a drop from earlier predictions of 2.4% and 2.1% respectively. Although trade tensions extended to China with a 20% tariff, the OECD has slightly increased its outlook for the U.S., projecting a growth rate of 4.8% due to other factors.
The OECD emphasizes that rising trade barriers and geopolitical uncertainties are pushing inflation higher and could potentially lead to prolonged higher interest rates. It highlights the possibility of deeper fragmentation within the global economy, raising serious concerns about finance and trade stability worldwide.
On a global scale, the OECD predicts a slowdown in growth from 3.2% in 2024 to 3.1% in 2025 as a direct consequence of these rising trade tensions. Although inflation rates are expected to decrease, the organization now estimates them to reach 3.8% for 2023 across major world economies, slightly up from initial forecasts.
In a related warning, Tesla CEO Elon Musk has expressed concerns that U.S. exporters may suffer significant adverse effects due to retaliatory actions stemming from the trade conflict. Meanwhile, the OECD has also revised its growth forecast for the United Kingdom but remains more optimistic than the Bank of England's predictions.
As the situation develops, the long-term implications of these trade wars on North American economies remain to be seen, with analysts and economists closely monitoring the evolving landscape.
Under the new outlook, Canada’s economy is now anticipated to expand by a meager 0.7% this year and in 2026, a sharp decline from previous forecasts that expected a growth rate of 2% for the same periods. Meanwhile, Mexico faces the dire prospect of a recession, with projections showing a contraction of 1.3% this year, followed by an additional shrinkage of 0.6% the next year, straying far from earlier expectations of growth.
The imposition of a 25% tariff on all steel and aluminum imports from Canada and Mexico, along with additional tariffs on various goods from these countries, is cited as a primary driver for this anticipated economic downturn. In retaliation, Canada and the European Union have begun to announce counter-tariffs, intensifying an already fraught economic landscape.
The report also indicates that U.S. growth will not remain unscathed, with forecasts downgrading growth to 2.2% this year and 1.6% in 2025, a drop from earlier predictions of 2.4% and 2.1% respectively. Although trade tensions extended to China with a 20% tariff, the OECD has slightly increased its outlook for the U.S., projecting a growth rate of 4.8% due to other factors.
The OECD emphasizes that rising trade barriers and geopolitical uncertainties are pushing inflation higher and could potentially lead to prolonged higher interest rates. It highlights the possibility of deeper fragmentation within the global economy, raising serious concerns about finance and trade stability worldwide.
On a global scale, the OECD predicts a slowdown in growth from 3.2% in 2024 to 3.1% in 2025 as a direct consequence of these rising trade tensions. Although inflation rates are expected to decrease, the organization now estimates them to reach 3.8% for 2023 across major world economies, slightly up from initial forecasts.
In a related warning, Tesla CEO Elon Musk has expressed concerns that U.S. exporters may suffer significant adverse effects due to retaliatory actions stemming from the trade conflict. Meanwhile, the OECD has also revised its growth forecast for the United Kingdom but remains more optimistic than the Bank of England's predictions.
As the situation develops, the long-term implications of these trade wars on North American economies remain to be seen, with analysts and economists closely monitoring the evolving landscape.
