By Nathan Layne and Leigh Thomas
(Reuters) -President Donald Trump’s tariff hikes will drag down growth in Canada, Mexico and the United States while driving up inflation, the OECD forecast on Monday, just as Trump promised to press ahead with a new wave of levies in early April.
Trump, speaking aboard Air Force One on route to Washington overnight, also repeated he had no plans to create exemptions for the 25% steel and aluminum tariffs that went into effect last week.
The Organization for Economic Cooperation and Development estimated in an economic outlook update that U.S.
households will pay a high direct price from the new import taxes, and the likely economic slowdown will cost the U.S. more than the extra income the tariffs are supposed to generate.
Global growth is on course to slow slightly from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, the Paris-based policy forum said, cutting its projections from 3.3% for both this year and next in its previous economic outlook, issued in December.
It said U.S.
economic growth was seen slowing this year to 2.2% – versus 2.4% in the OECD’s earlier estimate – and would lose more steam next year, with growth now estimated at 1.6%, down from 2.1% previously.
The Mexican economy, meanwhile, would be hit hardest by the tariff hikes, contracting 1.3% this year and a further 0.6% next year instead of growing 1.2% and 1.6% as previously expected.
Canada’s growth rate would slow to 0.7% this year and next, well below the 2% previously forecast for both years.
The OECD report is the latest to project that North American growth would be stymied by Trump’s tariffs, which have also torpedoed a range of measures of U.S.
household and business sentiment.
On Friday the University of Michigan reported that U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March and inflation expectations soared amid worries over tariffs.
And on Monday a gauge of factory activity in New York State from the Federal Reserve Bank of New York plummeted by the most in nearly two years and input costs surged, and a separate survey of home builders showed sentiment was the lowest in seven months.
Since returning to the White House in January, Trump has unleashed a barrage of tariff announcements.
He has imposed 20% levies on all imports from China, and has threatened, but delayed until April, 25% duties on most imports from Mexico and Canada as part of a demand the three countries help staunch the flow of fentanyl into the U.S.
He raised tariffs on imports of steel and aluminum to a flat 25%, effective last week, without exemptions or exceptions, in a move that was designed to help U.S.
industry while contributing to an escalating trade war.
And more are coming. He has promised tariffs on autos beginning April 2, alongside a more sweeping agenda of reciprocal tariffs, under which the U.S.
would match all levies on U.S. goods imposed by other countries.
“In certain cases, both,” Trump said when asked aboard Air Force One if he would be imposing sectoral and reciprocal tariffs on April 2.
“They charge us, and we charge them. Then, in addition to that, on autos, on steel, on aluminum, we’re going to have some additional,” he said.
Global stock markets have been pummeled by the developments, with the U.S.
benchmark S&P 500 index dropping by more than 10% from its mid-February record, although it retraced some of that decline in the last two sessions. The index was about 0.5% higher on Monday.
Canadian officials, in particular, have complained that it is increasingly difficult to negotiate with the Trump administration over the tariff threats.
“We’re looking at significant tariffs inconsistent with the USMCA (U.S.-Mexico-Canada Agreement on trade) being imposed willy nilly, without regard for the commitments that we have negotiated with the United States,” Colin Bird, Consul General of Canada in Detroit, said at an event in the Motor City on Monday.
“That is a problem for the United States, not only in its economic relationship with Canada, that’s a problem for its credibility in negotiating with the world.”
(Reporting by Nathan Layne aboard Air Force One, Kalea Hall in Detroit anad Leigh Thomas in Paris; Writing by Jeff Mason and Dan Burns; Editing by Kim Coghill and Lincoln Feast)
