The OECD’s semi-annual Economic Outlook, issued on November 21, warns that U.S.-China trade tensions are adversely affecting the global economic outlook and that the majority of the burden will be felt by U.S. consumers. And if the U.S.-China trade disputes continue to escalate, world trade could reduce significantly by 2021. In his remarks presenting the latest Economic Outlook, OECD Secretary General Angel Gurria highlighted downward adjustments in OECD’s forecasts for GDP growth rates from their May Outlook: dropping from 3.7% to 3.5% growth globally for 2019, with an additional 3.5% drop in 2020.
For the U.S. specifically, the OECD forecast for 2019 growth drops from 2.9% in May to 2.7% in this report and a further drop to 2.1% in 2020. For Europe’s “Euro Area”, the OECD now estimates 1.6% (down from 1.8% in the May Outlook) and 1.6% growth again in 2020. For China, the OECD is now forecasting 6.32% annual growth in 2019 (down from 6.6% in the May forecast) and 6.3% growth again in 2020. The slides from the OECD presentation demonstrate in more detail key trends the OECD identifies over the coming years.
Gurria highlighted one major reason for this decline in global growth prospects is a breakdown in international cooperation. The imposition of new tariffs and uncertainty about further restrictive trade actions are contributing to a marked slowdown in trade growth, dampening global investment and threatening jobs and living standards. The international rules-based system that has governed trade since the end of the Second World War has been undermined. Gurria’s perspective is blunt – “Protectionism is not the answer.” While Gurria does not explicitly call out U.S. trade policies, it seems clear that the U.S.-China trades disputes and U.S. more aggressive unilateral trade policy are significant factors helping drive down global economic forecasts.
USCIB President and CEO Peter Robinson took note of the OECD’s semi-annual Economic Outlook. “The OECD has earned international respect for its detailed and apolitical economic outlooks,” said Robinson. “All of us – governments, businesses and citizens – need to take heed to this OECD alarm bell. Economic growth is the force that drives investment, trade, jobs and better lives for citizens around the world. It seems clear that one key concerns causing the OECD and other experts to adjust their economic forecasts downward is increased protectionism. I agree with Secretary General Gurria that protectionism is not a solution; protectionism begets protectionism and downward pressures. We call upon the U.S. government, as well as other leading trade powers, to reject protectionism and provide global leadership to open trade and investment opportunities around the world.”
The OECD’s press release provides an excellent summary of their key analysis, findings and recommendations.