Canadian economy will be among those hit hardest by global slowdown, says OECD

Thomson Reuters

· Posted: Jun 03, 2025 10:03 AM EDT | Last Updated: 10 hours ago

Global economical maturation is slowing much than was expected lone a fewer months ago, arsenic the fallout from the Trump administration's commercialized warfare continues, the OECD said connected Tuesday, and Canada is among the countries wherever the downturn is astir concentrated.

The Organization for Economic Co-operation and Development (OECD) revised down its outlook, trimming its estimates from March for maturation of 3.1 per cent this twelvemonth and 3.0 per cent next year. The planetary system is connected people to dilatory from 3.3 per cent last twelvemonth to 2.9 per cent in 2025 and 2026, it said.

"The slowdown is concentrated successful the United States, Canada, Mexico and China, with different economies expected to spot smaller downward adjustments," the Paris-based enactment said successful its latest economical outlook.

The maturation outlook would apt beryllium adjacent weaker if protectionism increases, further fuelling inflation, disrupting proviso chains and rattling fiscal markets, it added.

"Additional increases successful commercialized barriers oregon prolonged argumentation uncertainty would further little maturation prospects and apt propulsion ostentation higher successful countries imposing tariffs," OECD Secretary General Mathias Cormann said arsenic helium presented the report.

If Washington raised bilateral tariffs by an further 10 percent points connected each countries, arsenic compared with the rates successful unit arsenic of mid-May, planetary economical output would beryllium astir 0.3 per cent lower aft 2 years, Cormann added.

"The cardinal argumentation priorities successful this discourse are constructive dialog to guarantee a lasting solution to existent commercialized tensions," Cormann said.

WATCH | Is Trump's negotiating strategy backfiring?: 

Canadian economical maturation could dilatory to 1% this year

The OECD projects that Canada's economical maturation volition dilatory from 1.5 per cent successful 2024 to 1.0 per cent successful 2025 and 1.1 per cent successful 2026 due to the fact that of commercialized tensions with the U.S., agelong its largest export market.

The enactment besides expects that concern business and exports will decline this year, and that a anemic labour marketplace volition measurement connected Canadian households' spending behaviour.

Headline ostentation volition tick up slightly, though the interaction of higher tariffs connected user prices volition beryllium partially offset by little state prices, which the enactment attributes to the extremity of the user c tax. 

LISTEN | Where Canada's economical roadworthy leads from here: 

It besides notes that halfway inflation — the Bank of Canada's preferred measurement for tracking price growth  — volition summation "for a period," earlier coming backmost down toward the cardinal bank's 2 per cent people adjacent year.

"Inflationary pressures from higher tariffs volition necessitate a much cautious attack to lowering involvement rates," the study said. The complaint presently sits astatine 2.75 per cent, with the bank's adjacent gathering acceptable for Wednesday.

"Increased authorities spending, peculiarly connected lodging affordability and caller societal programs, has precocious worsened the wide authorities balance, though it had antecedently been successful surplus."

OECD warns astir tariff interaction successful U.S.

Since taking office successful January, U.S. President Donald Trump's tariff announcements person roiled fiscal markets and fuelled planetary economical uncertainty, forcing him to locomotion backmost immoderate of his archetypal stances.

Last month, the U.S. and China agreed to a impermanent truce to standard backmost tariffs, portion Trump besides postponed 50 per cent duties connected the European Union until July 9.

The OECD forecast the U.S. system would turn lone 1.6 per cent this twelvemonth and 1.5 per cent next year, assuming for the intent of making calculations that tariffs successful spot mid-May would stay truthful done the remainder of 2025 and 2026.

For 2025, the caller forecast marked a sizable cut, arsenic the enactment had antecedently expected the world's biggest system would turn 2.2 per cent this twelvemonth and 1.6 per cent adjacent year.

While caller tariffs whitethorn make incentives to manufacture successful the United States, higher import prices would compression consumers' purchasing powerfulness and economical argumentation uncertainty would clasp backmost firm investment, the OECD warned.

WATCH | What to expect from whiplash U.S. tribunal ruling connected tariffs: 

Meanwhile, the higher tariff receipts would lone partially offset revenues mislaid owed to the hold of the 2017 Tax Cuts and Jobs Act, caller taxation cuts and weaker economical growth, it added.

Trump's sweeping taxation chopped and spending measure was expected to propulsion the U.S. fund shortage to 8 per cent of economical output by 2026 — among the biggest fiscal shortfalls for a developed system not astatine war.

As tariffs substance ostentation pressures, the U.S. Federal Reserve was seen keeping rates connected clasp done this twelvemonth and past cutting the fed funds complaint to 3.25 to 3.5 per cent by the extremity of 2026.

In China, the fallout from the U.S. tariff hikes would beryllium partially offset by authorities subsidies for a trade-in programme connected user goods similar mobile phones and appliances and accrued payment transfers, the OECD said.

It estimated the world's second-biggest economy, which is not an OECD member, would turn 4.7 per cent this twelvemonth and 4.3 per cent in 2026, small changed from erstwhile forecasts for 4.8 per cent in 2025 and 4.4 per cent successful 2026.

The outlook for the euro country was unchanged from March, with maturation forecast this twelvemonth astatine 1.0 per cent and 1.2 per cent next year, boosted by resilient labour markets and involvement complaint cuts, portion much nationalist spending from Germany would buoy 2026 growth.