Protectionism Threatens Global Economic Growth

The Organisation for Economic Co-operation and Development (OECD) has warned of the growing risk of protectionism derailing global economic growth. As trade tensions escalate and countries impose tariffs and other barriers, supply chain disruptions and higher consumer prices loom large. In its latest Economic Outlook, the OECD cautioned that further moves towards protectionism could reverse the recovery in global trade, which is expected to reach 3.6% in 2025.

The OECD's outlook for major economies underscores the potential impact of protectionism. In the United States, growth is expected to ease from 2.8% this year to 2.1% by 2026, as protectionist policies weigh on the economy. Similarly, in China, growth is set to slow from 4.9% to 4.4% by 2026, despite monetary and fiscal easing, due in part to sluggish consumer spending and trade tensions. Meanwhile, the euro zone, Japan, and the UK also face growth headwinds from protectionist measures.



To mitigate the risks posed by protectionism, international cooperation and trade agreements are crucial. Multilateral trade negotiations, such as those under the World Trade Organization (WTO), can help establish and strengthen rules-based trade agreements. These agreements can reduce tariffs, non-tariff barriers, and other trade-restrictive measures, fostering smoother cross-border trade and encouraging businesses to invest in international markets.

Industries most exposed to tariffs and trade restrictions, such as automobiles, electronics, and textiles, face significant challenges. These sectors have complex global supply chains, and disruptions can lead to higher costs and reduced sales for companies. To navigate these risks, investors should consider diversifying their portfolios across sectors and regions, while monitoring geopolitical developments and regulatory environments.

In conclusion, the OECD's warning about the risk of protectionism to global growth underscores the importance of international cooperation and open trade policies. As trade tensions escalate, countries must work together to maintain a stable and predictable global trading environment. By doing so, they can mitigate the risks posed by protectionism and foster sustainable economic growth.