The Organisation for Economic Co-operation and Development (OECD) yesterday warned that protectionist trade measures pose a major risk to the world economy, just weeks before US president-elect Donald Trump is to return to the White House next month.
The Paris-based OECD did not name Trump in its updated analysis of the world economy, but it was abundantly clear that the organization was warning about Trump’s possible tariff measures on US trading partners.
While the OECD raised its global growth forecast to 3.3 percent next year, it said that “greater trade protectionism, particularly from the largest economies” poses a “downside risk” along with geopolitical tensions and high public debts.
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“Increases in trade-restrictive measures could raise costs and prices, deter investment, weaken innovation and ultimately lower growth,” the OECD said in its economic outlook.
“Further increases in global trade restrictions would add to import prices, raise production costs for businesses and reduce living standards for consumers,” it added.
A recent study by the Roland Berger consultancy calculated the cost of the US measures, and likely countermeasures by China and the EU, at more than US$2.1 trillion through 2029.
Trump is far from the only risk in terms of protectionist measures. A spat has also broken out between Brussels and Beijing after the EU imposed import tariffs on Chinese electric vehicles. China has retaliated with tariffs on EU brandy, including cognac.
The OECD sees the US economy expanding 2.4 percent next year, up from its September forecast of 1.6 percent growth. It also raised its forecast for the UK’s growth next year 0.5 percentage points to 1.7 percent due to higher public spending planned by the new Labour Party government.
China’s economy is expected to expand 4.7 percent next year, an increase of 0.2 percentage points, while India’s growth forecast was raised 0.1 percentage points to 6.9 percent.
However, France and Germany saw 0.3 percentage point cuts to their growth forecasts to 0.9 percent and 0.7 percent respectively, as both countries face political crises amid mounting fiscal pressure, the OECD said.
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