Trump Tariffs Slash Growth Forecasts for Canada and Mexico
Let's talk about the latest economic warning from the OECD—one that could have major implications for North America and beyond. The Organisation for Economic Co-operation and Development (OECD) has issued a stark forecast about the impact of former U.S. President Donald Trump's trade tariffs, and the numbers are not looking good, especially for Canada and Mexico.
So, what exactly is happening? Well, Trump’s aggressive tariff policies—particularly the 25% tariffs on steel and aluminum imports, along with additional levies on goods from Canada and Mexico—are wreaking havoc on these economies. The OECD’s latest projections paint a grim picture: Canada’s economic growth is now expected to shrink to just 0.7% in both 2025 and 2026. To put that in perspective, the previous forecast was 2% for both years. That’s a massive downgrade. But Mexico is facing an even worse situation. The OECD now predicts that Mexico’s economy will contract by 1.3% this year and another 0.6% in 2026. Originally, the forecast was for moderate growth of 1.2% and 1.6%, but those hopes have been dashed by escalating trade tensions.
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And it's not just Canada and Mexico feeling the pinch—these tariffs are making waves across the entire global economy. The U.S. itself is projected to slow down, with growth now pegged at 2.2% this year and 1.6% in 2025—both lower than previous estimates. Even though the tariffs were aimed at boosting the U.S. economy, the opposite is happening. Higher trade barriers, increased policy uncertainty, and inflationary pressures are dampening investment and consumer spending. The OECD warns that this trade war could push inflation even higher, forcing central banks to keep interest rates elevated for longer than expected.
One of the more surprising aspects of this report is that, despite being a direct target of U.S. tariffs, China has managed to slightly improve its growth forecast. The OECD now expects China to grow by 4.8% this year, thanks in part to government interventions aimed at stabilizing its economy. This means that while North America struggles, China might actually weather the storm better than expected.
The OECD’s warning is clear: if trade tensions continue to escalate, we could see even more severe economic consequences. A further fragmentation of the global economy is a real risk, and additional trade barriers would only exacerbate inflation and slow down growth across the board. Already, businesses in the U.S. are feeling the heat. For example, Tesla and other exporters have raised concerns about retaliatory tariffs from other nations, which could impact their bottom line.
In the UK, the situation isn’t looking great either. The OECD downgraded the UK’s growth forecast to 1.4% for 2025, down from the previous estimate of 1.7%. While this is still better than the Bank of England’s more pessimistic outlook, it adds to the overall economic uncertainty.
Bottom line? Trump’s tariffs are hitting hard, and the OECD is making it clear that the economic fallout is far from over. Businesses, consumers, and policymakers alike will need to navigate these choppy waters carefully. If these trade barriers persist, we may see an even greater slowdown in global economic activity.
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