The Organization for Economic Cooperation and Development (OECD) just predicted that U.S. economic growth will come to a crawl at 1.6% in 2023. That is a sharp drop from the 2.8% growth achieved during the past fiscal year. The current trade wars President Donald Trump started are pushing us into this downturn. They have thrown a wrench into global commerce, raised costs significantly, and fostered an environment of instability for firms and consumers.
Trump’s trade policies have strained international relations and transformed the landscape of global trade. Yet his administration has imposed new tariffs on imports from almost every country, including our closest allies. Specifically, they have implemented a 10% tariff on steel, aluminum, and cars. The impact of these tariffs has been to increase costs for American manufacturers who depend on imported raw materials and components. These tariffs would begin to look modest compared to Trump’s threat to go even further and double tariffs on steel and aluminum to 50%. This has alarmed many economic analysts nationally and internationally of the potential impacts on international and domestic markets.
The impacts of these trade wars are felt well beyond U.S. shores. And second, it’s because last year, China’s economy grew by only 5%. The experts are anticipating a big slowdown, projecting for 5.7 percent growth in 2024 down to just 4.7% in 2025 and 4.3% in 2026. Analysts warn that Trump’s trade wars will further harm Chinese exporters, complicating their ability to navigate the evolving landscape of global trade.
In a recent ruling, a federal court in New York blocked most of Trump’s tariffs, determining that he had overstepped his authority in imposing them. This small but powerful decision raises fundamental questions about the fate of his presidency’s best and most progressive trade policy. It queries their positive impact on economic growth.
To compound these problems, the OECD recently predicted that global economic growth will decelerate to just 2.9% this year. It forecasts that this trend will continue at least at the same rate through 2026. Trump’s trade wars have increased that uncertainty, causing a sudden increase in trade barriers. This has led to the increased economic uncertainty, which OECD chief economist Álvaro Pereira calls “the curse of economic volatility.” He noted that these kinds of conditions really obstruct global commerce and make the picture much more difficult for the economic outlook.
Compared to the U.S. outlook, the eurozone seems better positioned for a gradual rebound. 20 countries that use the euro, which economists predict will be an economic powerhouse. It will increase, too, from 0.8% last year to 1% in 2025 before breaking above 1% to get to 1.2% in 2026. This steady but positive development should provide some hope, even as economic calamity rages around us.
In reaction to these combined pressures, Beijing has announced a flurry of blueprints focused on jumpstarting its economy. Such measures as further reducing interest rates, promoting bank financing, and increasing investments in factory renovations and elderly care projects. Such measures are a natural result of China’s desire to stimulate its economy ahead of the coming slowdown.
Nations are already contending with the burdens of increasing trade protectionism and tariffs. Because of this, businesses and consumers are left to deal with an unpredictable economic environment. The uncertainty caused by Trump’s tariffs has created great uncertainty on the global stage, creating hesitance in market players.
