WASHINGTON (AP) — U.S. economic growth will slow to 1.6% this year from 2.8% last year as President Donald Trump’s erratic trade wars disrupt global commerce, drive up costs and leave businesses and consumers paralyzed by uncertainty.
The Organization for Economic Cooperation and Development forecast Tuesday that the U.S. economy — the world’s largest — will slow further to just 1.5% in 2026. Trump’s policies have raised average U.S. tariff rates from around 2.5% when he returned to the White House to 15.4%, highest since 1938, according to the OECD. Tariffs raise costs for consumers and American manufacturers that rely on imported raw materials and components.
World economic growth will slow to just 2.9% this year and stay there in 2026, according to the OECD’s forecast. It marks a substantial deceleration from growth of 3.3% global growth last year and 3.4% in 2023.
Slowed growth (or economic contraction) is hugely problematic in view of the chronic budget deficit in the U.S. If the budget deficit is 2% and the GDP is growing by 3% annually, that situation can continue indefinitely because the growth is able to cover the increased debt service. However, if the budget deficit balloons and the economy shrinks or grows only very slowly, it sets up a potential debt crisis. As the debt service becomes a bigger and bigger burden, bond buyers funding the deficit demand higher interest to compensate for the additional risk. Higher interest rates slow growth even more, and it becomes a feedback loop. In addition, fewer bond buyers usually leads to the Fed “printing” money to buy bonds itself, debasing the currency. If Trump’s policies continue, we’re going to have a financial crisis that will make the 2008 financial crisis look quaint. This is particularly so because the administration is intent on changing capital requirements for banks to incentivize them to buy bonds. When the crisis hits, expect bank runs and failures. This is all going to happen within 3 years.
Thanks Trump
He still has plenty of time to turn it into a -2% growth and believe me he will try. The only hope the markets have now is TACO and that’s not much
