The Organization for Economic Cooperation and Development (OECD) warned that the tariff war triggered by U.S. President Donald Trump is hindering global economic growth. The OECD downgraded growth forecasts for 12 countries among the G20, including South Korea.

Containers are stacked at the export yard of Pyeongtaek Port in Pyeongtaek, South Korea, on the afternoon of the 14th. /Courtesy of News1
Containers are stacked at the export yard of Pyeongtaek Port in Pyeongtaek, South Korea, on the afternoon of the 14th. /Courtesy of News1

According to the Financial Times (FT) and the Wall Street Journal (WSJ) on the 17th (local time), the OECD projected that the global economic growth rate would slow from 3.2% last year to 3.1% this year and 3% next year. This outlook was made under the assumption that the United States would impose an additional tariff of 25% on goods from Canada and Mexico and a tariff of 20% on goods from China, while increasing tariffs on aluminum and steel imports.

In particular, the economic growth rate forecasts for Mexico and Canada, which have the most transactions with the United States, were significantly downgraded. The OECD initially expected Mexico's economy to grow by 1.2% this year and 2.8% next year, but revised the forecast to a growth of 1.3% this year and a contraction of 0.6% in 2026. Canada, which had predicted economic growth of 2%, was downgraded to a growth of 0.7% for both this year and next year.

The OECD projected that for the G20 countries, including South Korea, "the policy uncertainty will cause corporations to delay investments, and consumers will be under pressure from rising prices, leaving almost no country where growth will not be hindered."

A rental notice is posted in a commercial building in downtown Seoul in December last year. /Courtesy of News1
A rental notice is posted in a commercial building in downtown Seoul in December last year. /Courtesy of News1

The OECD presented South Korea's growth rate forecast for this year at 1.5%, down 0.6 percentage points from its December forecast. This is lower than the International Monetary Fund (IMF) estimate of 2.0%, the government estimate of 1.8%, and the Korea Development Institute (KDI) estimate of 1.6%, and matches the Bank of Korea's forecast of 1.5%.

Conversely, the forecast for China's economic growth rate was revised upward. The OECD expects the Chinese economy to grow by 4.8% this year and 4.4% next year. It diagnosed that the negative impact of the additional tariffs from the United States would be offset by increased support from the Chinese government.

The negative impacts of the tariff war are also projected to affect the United States. The U.S. gross domestic product (GDP) growth rate is expected to slow from 2.8% last year to 2.2% this year and 1.6% next year. As trade barriers rise, inflation will continue, and it is expected that the Federal Reserve (Fed) will maintain the current interest rate of 4.25% to 4.5% until mid-2026, revising previous projections that it would lower the interest rate to 3.25% to 3.5% by the first quarter of 2026.

The OECD analyzed that while the U.S. government may collect additional revenue from tariffs, the economic recession will lead to a decline in other tax revenues, offsetting the high tariff effects. The OECD noted that "to maintain the overall budget deficit, additional tax increases or reductions in expenditure will be necessary."