President Trump’s trade war would put a brake on global economic growth and stoke inflation, according to new forecasts by the Organization for Economic Co-operation and Development.

Why it matters: The OECD sees a stagflationary economic scenario for the U.S. and its North American allies, with significant GDP downgrades across the continent and new price pressures as a result of tariffs and policy uncertainty.

What they’re saying: “The overall picture is one of generalized [growth] downgrades partly because of trade uncertainty and economic policy uncertainty, but also the imposition of tariffs,” Álvaro Pereira, the OECD’s chief economist, told reporters on Monday.

State of play: The organization has a gloomier outlook for the world’s major economies than at the end of 2024.

• That includes the U.S., the world’s engine of growth, which economists had regularly upgraded — until now.

By the numbers: U.S. GDP growth will slow from “its very strong recent pace” of 2.8% in 2024 to 2.2% this year, and 1.6% in 2026, the OECD says.

• That is a downgrade, versus the December forecast, of 0.2 percentage point this year and a whopping 0.5 percentage point for 2026.

Between the lines: No nations had bigger growth downgrades than Mexico and Canada, a sign of the economic damage ahead for the two nations if trade tensions ramp up.

• The OECD says Mexico will fall into a recession with a 1.3% contraction in GDP this year, a vastly different scenario than December when the economy was expected to grow by a similar amount.
• Canada is expected to grow just 0.7% this year and next, a downgrade from the 2% growth rates the OECD estimated in December.

The intrigue: Despite the anticipated economic slowdowns, the OECD expects worsening inflation pressures across all three nations — a toxic mix that, if realized, would be a headache for policymakers.

• In the U.S., headline inflation will be 2.8% this year, the OECD projects — up from the 2.5% at the end of 2024 and 0.7 percentage point above the December forecast.
• Price pressures will remain in 2026, with inflation at 2.6%, roughly 0.6 percentage point higher than previously thought.

The big picture: The OECD projections assume the U.S. raises tariffs on all imports from Canada and Mexico by an additional 25% on April 1.

• The White House has warned that “reciprocal” tariffs on a slew of nations will also take effect in early April, though the details of that policy remain unclear.

The bottom line: “Activity would be stronger and inflation lower in all three economies if these tariff increases were lower or confined to a smaller range of goods, but global growth would still be weaker than previously expected,” the OECD report says.