Perhaps the most striking conclusion of the Organisation for Economic Cooperation and Development’s revisions to its global growth forecasts is that the United States, largely responsible for the downgrades, will be hit harder than most of the rest of the world.

According to the OECD, global growth will slow from the 3.1 per cent generated last year to 2.9 per cent this year and a similar number in 2026.

It is likely that the OECD is underestimating the damage Trump’s trade wars will do to the American economy.Credit: Bloomberg

With a few exceptions (Australia is one), most of the advanced economies will see reduced growth this year and next, with some recoveries in growth rates in 2026.

The US posted growth of 2.8 per cent last year and was expected to grow 2.2 per cent this year when the OECD last updated its forecasts in March. Now that forecast has been downgraded to growth of 1.6 per cent this year and 1.5 per cent next year.

The OECD’s forecasts are likely to prove conservative. Economic forecasts from bodies like the OECD or International Monetary Fund tend to understate outcomes, in both directions, but generally get the trend lines of economies broadly right.

In this instance, with the OECD pointing to US President Donald Trump’s trade policies as the major factor in the weakening of global economic prospects, it is almost certain to have underestimated their impact because it is basing them on where Trump’s tariffs are set today – the 10 per cent universal baseline tariff on all imports to the US and the 30 per cent tariff on imports from China.

With Trump making up tariffs on the run – the doubling of the tariffs on aluminium and steel to 50 per cent last week came out of the blue – and the nature and scale of the so-called “reciprocal” tariffs unknown until next month (assuming they survive the court........

© Brisbane Times