A new report finds that despite the negative impacts of tariff policies worldwide so far, including in Canada, global economies are still expected to grow — unless tariffs escalate for the worse.
The latest economic outlook by the Organization for Economic Co-operation and Development, an intergovernmental organization with 38 member countries, shows that even as tariffs are creating significant challenges for economies worldwide, most are still performing better than expected.
“Global growth proved more resilient than expected in the first half of 2025, especially in many emerging markets but also the United States,” the report says.
“While the full impact of tariff increases is still unfolding, early signs of effects are visible in consumer behaviour, labour markets and prices.”
In March, United States President Donald Trump sparked a trade war by imposing tariffs on almost all countries, including Canada.
Talks are underway towards reviewing the Canada-United States-Mexico trade agreement (CUSMA) next year, with both the U.S. and Canada announcing public consultations earlier this month.
Tariffs that are currently in place have been leading to higher costs for some goods and services, which has led businesses to make difficult decisions.
Some businesses have reportedly been “absorbing” some of the increases so as to not have to raise prices for customers, but this has also meant losing potential profits. In other instances, businesses have had to adjust or halt expansion plans and diversify their supply chains to navigate around tariffs they would otherwise have to pay.
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Small businesses in particular are at higher risk of closing permanently because of tariffs.
Canada’s labour market has also been getting hit, with the national unemployment rate rising above seven per cent in August, and consumers have also been reducing their spending.
These effects from the trade war have been seen not only in Canada but also in many other countries, according to the report from the OECD.
“Labour markets are softening, with higher unemployment and fewer job openings in some economies, while disinflation has stalled in many economies as food prices rose and services inflation remained persistent,” the report said.
Economies are still expected to grow in the coming months and into next year — albeit modestly.
The OECD report expects economic output globally, measured by gross domestic product, to rise 3.2 per cent by the end of this year, and that compares with a previous expectation of 2.9 per cent growth.
For 2026, the OECD says global growth is still expected to rise 2.9 per cent as the full effect of tariffs unfolds.
GDP is the measure of a nation’s total sum of all goods and services produced in a given period, and is a key way to tell if an economy is in a recession — an extended period of weakness in an economy.
Canada’s GDP has been showing some signs of slower growth, with June’s GDP marking a third straight monthly decline, totalling 0.3 per cent, and July’s GDP report is due on Sept. 26.
The OECD report says that by the end of this year, Canada’s GDP will grow by one per cent, and that compares with a 1.5 per cent increase in 2024.
In 2026, the organization expects Canada’s GDP to rise 1.1 per cent for the full year.
On Sept. 17, the Bank of Canada delivered its first rate cut since March, and cited the “weaker economy” amid the trade war as the signal that it was time to bring down borrowing costs.
“(The Bank of Canada) published three scenarios for the Canadian economy: one based on current tariffs, another one with an escalation of tariffs, and another with a de-escalation. If you take the current tariff scenario, which is roughly the tariff scenario we’re still in, we’re not expecting a recession,” governor Tiff Macklem said to reporters after the announcement.
“Growth was clearly negative in the second quarter, we are expecting growth somewhere around one per cent in the second half of the year. So that is slow growth. It’s not going to feel good. It is growth, but it’s slow growth because the economy is adjusting to a different relationship with its biggest trading partner.”
The OECD is remaining cautious in warning that tariff policies are “still unfolding,” and urging that “countries should co-operate to ease trade tensions and lower trade barriers while addressing economic security concerns.”
The OEC adds that central banks, like the Bank of Canada, need to “remain vigilant” in maintaining price stability by adjusting interest rates as needed, and public debt must be minimized to help “preserve the capacity to respond to future shocks.”
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