Global supply chains are under increasing strain, and the Organization for Economic Co-operation and Development (OECD) warns that this will lead to higher prices as a direct consequence of the ongoing trade war. The OECD has significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, signaling a challenging period for consumers worldwide.
The OECD’s latest outlook report underscores that “weakened economic prospects will be felt around the world, with almost no exception,” leading to “lower growth and less trade [that] will hit incomes and slow job growth.” The report identifies the United States, Canada, Mexico, and China as major contributors to this anticipated global economic contraction, highlighting the broad impact on interconnected supply networks.
A key concern emphasized by the OECD is that “protectionism” will put pressure on inflation, meaning costs for goods and services will rise. This directly contradicts the idea that tariffs solely benefit domestic producers, instead suggesting they will burden consumers with increased prices. The report also emphasizes the heightened risk this poses for developing nations, especially those with high public debt, as they navigate increased borrowing costs and refinancing needs.
In response to these looming threats, the OECD advises central banks to “remain vigilant” in monitoring inflation, even if immediate interest rate hikes are not anticipated. Furthermore, the report stresses the critical need for increased investment to revitalize economies and strengthen public finances, acknowledging that debt-laden governments may find it difficult to fund essential projects that could alleviate supply chain pressures.