Global economy set for slowest growth since Covid as Trump's trade wars take their toll

By JOHN-PAUL FORD ROJAS

Updated: 22:05 BST, 3 June 2025

The world economy is on course for the slowest growth since the pandemic as Donald Trump’s trade wars take their toll, the OECD warned yesterday.

The latest forecast from the Paris-based Organisation for Economic Cooperation and Development pointed to growth of just 2.9 per cent this year and next.

And Bank of England governor Andrew Bailey gave his strongest comments yet on the impact of Trump’s tariff war on global trade, saying it had been ‘blown up’.

The impact of the disruption was laid bare in separate figures showing China’s manufacturing centre went into reverse last month as US tariffs bite.

The OECD’s forecast for a slowdown would mean world growth falling below 3 per cent for the first time since 2020 – when Covid lockdowns sent business activity into reverse.

Back in March it had predicted 3.1 per cent growth in 2025 and 3 per cent in 2026.

Tariff turmoil: The latest forecast from the Paris-based Organisation for Economic Cooperation and Development pointed to global growth of just 2.9% this year and next

The US, the world’s biggest economy, saw a dramatic downgrade from 2.2 per cent to 1.6 per cent for this year. Britain is expected to grow by 1.3 per cent, down from 1.4 per cent.

OECD secretary-general Mathias Cormann said: ‘The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path.

Today’s policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.’

Trump introduced swingeing tariffs on trading partners on ‘Liberation Day’ at the start of April – before he was forced into a 90-day pause when markets sold off sharply.

Separate tariffs have also been introduced covering the likes of steel and cars.

UK businesses continue to suffer despite a much-vaunted deal between Britain and the United States – which was announced nearly a month ago but has yet to take effect.

It means that a decision by Trump to hike additional tariffs on steel from 25 per cent to 50 per cent will hit British industry despite the promise of relief.

Yesterday, Bank governor Bailey highlighted in stark terms the damaging impact that the disarray would have on investment decisions and broader global growth.

He told the Commons Treasury select committee: ‘The overall picture on trade now, I’m afraid, is one where the rules-based system is dead.

‘Over a long time we built up a pattern of world trade agreements which led to a lowering of tariffs.

‘I’m afraid that system has now really been blown up to a considerable degree, let’s be honest, by all of this. That has very serious consequences for the world economy.’

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Global economy set for slowest growth since Covid as Trump’s trade wars take their toll

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Global economy set for slowest growth since Covid as Trump’s trade wars take their toll