Beijing, March 18, 2025 – Chinese economy is seen to grow 4.8 per cent this year, with any decline in demand felt across multiple industries and regions
China’s economy is set to slow further as a result of new tariffs imposed by US President Donald Trump, with global repercussions, the Organisation for Economic Cooperation and Development said on Monday.
According to the OECD’s latest outlook, the Chinese economy will likely grow by 4.8 per cent this year before slowing to a 4.4 per cent clip in 2026.
The organisation attributed part of the deceleration to the 20-percentage-point increase in tariffs imposed by the US on Chinese imports, which has triggered retaliatory action by Beijing.
Escalating tensions between the world’s two largest economies have elicited global concerns, with several experts apprehensive about the potential for a more protracted trade conflict than the one he started in his first term.
Last month, Trump signed executive orders imposing a 10 per cent tariff on all Chinese imports citing alleged intellectual property theft, forced technology transfers and the damage caused by fentanyl exported from China as reasons for the decision.
China retaliated with 15 per cent tariffs on US coal, liquefied natural gas, oil and agricultural machinery.
In response, Washington raised tariffs further to 20 per cent on March 4 – and Beijing came back with additional tariffs on US chicken, wheat, corn, cotton, sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
If the OECD forecast holds, China is likely to see economic growth slightly below its target this year.
Earlier this month, Chinese Premier Li Qiang projected growth of ‘around 5 per cent’ in his work plan at the Two sessions, without setting a specific figure.
Li also said he expected inflation this year at 2 per cent and urban unemployment at about 5.5 per cent.
While the OECD report did not provide a detailed breakdown of the specific Chinese industries affected, it noted that tariffs would raise trade costs, disrupt supply chains, and increase business uncertainty.
Higher costs are also likely to be passed on to consumers and producers alike, affecting both final goods and intermediate inputs.
“The imposition of new bilateral tariff rates and the associated increase in policy and geopolitical uncertainty will act as a drag, particularly on business investment and trade,” it noted.
The OECD noted that China’s inflation rate is expected to remain low – projected at 0.6 per cent in 2025 – but that the tariffs could lead to price increases in some sectors.
As the world’s second-largest economy, any decline in Chinese demand is felt across multiple industries and regions.
Global GDP growth is projected to moderate from 3.2 per cent in 2024 to 3.1 per cent in 2025 and 3.0 per cent in 2026, the organisation forecast, suggesting that weaker growth in China would particularly affect commodity-exporting nations, which rely heavily on sales to China.
As a result, countries like Brazil, Australia and Canada could experience declining revenues due to lower demand for raw materials.
The trade tensions between China and the US also pose risks of further global economic fragmentation, adding inflation to countries still struggling to deal with increasing prices for consumers.
With the US imposing higher tariffs on Canada and Mexican imports as well, global supply chains are facing increased strain.
The OECD warned that “higher costs will be amplified where inputs cross borders several times and duties are incurred at each stage”, a particular concern for integrated industries like electronics and automobile manufacturing.
The report conceded that geopolitical uncertainty made forecasting difficult.
The organisation said that if the US and China reach an agreement to eliminate or reduce tariffs, this could “push economic growth higher and reduce inflation relative to the baseline”.
