How Trump’s tariff war is slowing global economic growth

US President Donald Trump

US President Donald Trump's belligerent tariff stance has begun to slow the world economy, the Organization for Economic Cooperation and Development warned. In its latest projections, the Paris-based body forecast world growth at 3.2 percent in 2025, modestly down on a year ago, and projected a deeper fall to 2.9 percent in 2026 as the full effects of tariffs filter through supply chains and consumer markets, the New York Times said.

The extent of US tariffs

Trump has imposed tariffs of up to 50 percent on steel, aluminium and a range of manufactured goods. The move is aimed not just at rivals like China but also at long-time friends, the European Union, Canada and India. The effective US tariff rate has reached 19.5 percent, the highest since 1933, the OECD says, changing trade flows and forcing companies to rethink production and investment strategies.

Short-term stability, long-term danger

The OECD said the world economy performed better than expected in the first half of 2025. Exporters sent most of their shipments to the United States in advance of tariffs going into effect, boosting production temporarily. But the organization cautioned that the resilience is fading as firms are now faced with higher costs, supply chain problems and declining orders. The result, it added, is growing uncertainty for firms and households.

Consumers and workers shoulder the burden

For American families, the tariffs are being felt in the form of higher prices for imported goods, and households are tightening their purse strings. In impacted nations, the impact is being felt in labour markets, where companies are cutting jobs or dismissing workers. The OECD warned that prolonged trade tensions risk undermining confidence, discouraging investment and weakening job security in advanced and emerging economies alike.

A weakened international environment

The rise in tariffs is taking place against the background of rising geopolitical tensions and shifting economic policies across the world. The OECD report asserted that these forces contribute to the risks to world markets, varying from supply chain disruption to volatile flows of capital. It urged governments to attempt to lower trade barriers and not to make policy adjustments that would further destabilize growth.

The broader implications

The Trump administration has defended tariffs as a way of protecting American businesses and reconfiguring trade relationships. But the OECD warning also points to the broader costs of doing so, with spillovers extending far beyond the United States. As growth eases into 2026, the question is whether the world economy will be able to adapt to a prolonged period of trade restraint, or whether higher barriers will intensify the slowdown even more.