OECD: Protectionism Driving Up Inflation, Threatening Global Financial Stability

Protectionism is driving up inflation, a trend that threatens global financial stability, according to a new report from the Organization for Economic Co-operation and Development (OECD). The OECD has also significantly lowered its global economic growth projections, now anticipating a decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, underscoring the interconnected economic risks.
The OECD’s latest outlook report states unequivocally that “weakened economic prospects will be felt around the world, with almost no exception.” It predicts that “lower growth and less trade will hit incomes and slow job growth,” signaling a pervasive negative impact on livelihoods globally. The United States, Canada, Mexico, and China are specifically identified as major contributors to this anticipated global economic decline, their trade policies influencing this inflationary trend.
The report explicitly warns that “protectionism” will put pressure on inflation, causing costs for goods and services to rise. This directly challenges the idea that tariffs are solely beneficial, instead suggesting they will burden consumers and contribute to financial instability. The report also highlights the elevated risk this poses for developing nations, particularly those with high levels of public debt, as they navigate increased borrowing costs and refinancing needs.
In response to these looming threats, the OECD advises central banks to “remain vigilant” in monitoring inflation, even if immediate interest rate hikes are not anticipated. Furthermore, the report stresses the critical need for increased investment to revitalize economies and strengthen public finances, as a stable financial environment is crucial for both growth and managing inflationary pressures.