OECD Warns: Trump’s Tariffs Threaten China’s Economy and Global Trade Growth

The Chinese economy is expected to expand by 4.8% this year, experiencing reduced demand across various sectors and areas.

The Organization for Economic Co-operation and Development stated on Monday that China’s economy is expected to decelerate even more due to the new tariffs introduced by U.S. President Donald Trump, which will have worldwide implications.

The OECD’s most recent forecast indicates that China’s economy is expected to expand by 4.8% this year, then slow down to a growth rate of 4.4% in 2026. According to the organization, one reason for this slowdown can be linked to the substantial rise in U.S. tariffs on Chinese goods—increased by 20 percentage points—which prompted countermeasures from Beijing.

Rising tensions between the globe’s two biggest economic powers have sparked worldwide worries, as many specialists fear the possibility of an even longer-lasting trade dispute than the one initiated during his initial tenure.

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A month ago, President Trump approved executive orders that imposed a 10 percent tax on all goods coming into the United States from China. He justified this move due to claims of IP theft, mandatory tech transfer requirements, and harm resulting from fentanyl being sent out of China. In response, China hit back by applying a 15 percent duty on American products including coal, liquid natural gas, crude oil, and farm equipment.

As a countermeasure, Washington increased tariffs to 20 percent on March 4th. In retaliation, Beijing imposed extra duties on various U.S. goods including poultry, wheat, maize, cotton, millet, soya beans, pork, beef, seafood, fruits, vegetables, and dairy products.

If the OECD forecast holds, China is likely to see economic growth slightly below its target this year.

Earlier this month, Chinese Premier Li Qiang forecasted a growth rate of around 5 percent as part of his plans.
agenda for the Two Sessions
, without establishing a precise target. Li also mentioned his expectation for an inflation rate of around 2% this year and urban unemployment to be approximately 5.5%.

Although the OECD report didn’t offer an in-depth analysis of particular sectors within China that were impacted, it highlighted that tariffs would lead to higher trade expenses, disturb supply networks, and boost corporate unpredictability. These increased costs may well be transferred to both buyers and sellers, influencing everything from finished products to intermediary components.

It pointed out that the introduction of new bilateral tariff rates and the resulting rise in policy and geopolitical uncertainty will hinder economic activities, notably business investments and trade.

The OECD observed that China’s inflation rate is anticipated to stay low, with an estimated figure of 0.6 percent for 2025; however, they also indicated that the tariffs might cause price hikes in certain industries.

Given China’s status as the globe’s second-biggest economic power, a reduction in Chinese consumption impacts numerous sectors and areas worldwide.

The organization forecasts that global GDP growth will slow down, dropping from an estimated 3.2 percent in 2024 to 3.1 percent in 2025 and further to 3.0 percent in 2026. This indicates that diminished economic expansion in China could have a significant impact on countries exporting commodities, as these nations depend considerably on selling their goods to China.

Consequently, nations such as Brazil, Australia, and Canada might face decreasing income resulting from reduced demand for raw materials.

Trade disputes between China and the United States also carry the risk of exacerbating global economic divisions, compounding inflation issues for nations that continue to grapple with rising consumer costs.

With the US imposing
increased duties on goods coming from Canada and Mexico
Similarly, global supply chains are encountering greater stress.

The OECD cautioned that “increased expenses will be magnified when inputs traverse international boundaries multiple times, with tariffs being imposed at every phase,” which poses a significant issue for sectors such as electronics and automotive production that rely heavily on integration.

The report acknowledged that geopolitical instability made predictions challenging. The organization stated that if the
The US and China have reached a deal.
To remove or decrease tariffs might “boost economic growth and lower inflation compared to the current scenario.”

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