U.S. Tariffs Reach Record Levels, Threatening Global Economic Stability

As trade tariffs imposed by President Donald Trump continue to impact over 90 of the United States' trading partners, the average duty rate for American imports surged to approximately 19.5% in August—the highest level recorded since 1933. These tariffs are influencing economic conditions not only domestically but also globally, contributing to declines in GDP growth across various countries. Recently released forecasts by the Organisation for Economic Co-operation and Development (OECD) indicate that international GDP growth is expected to fall from 3.3% last year to 3.2% in 2023, with projections further declining to 2.9% by 2026. The U.S., having imposed significant tariffs this year, may experience a sharper decline in GDP growth, dropping from 2.8% in 2024 to 1.8% in 2025, and reaching just 1.5% in 2026. The OECD has attributed much of this expected downturn to the elevated tariff rates alongside a decrease in net immigration. Despite this, global economic resilience has been noted during the first half of 2025, with emerging market economies adapting and benefitting from increased trade activity, primarily driven by American companies placing advance orders. In contrast, China, a key focus of the tariff implementations, is projected to achieve GDP growth rates of 4.9% for the current year, potentially softening to 4.4% in 2026 as the long-term impacts of increased tariffs begin to manifest. OECD analysts have commented, “The full effects of tariff increases have yet to be felt—with many changes being phased in over time and companies initially absorbing some tariff increases through margins—but are becoming increasingly visible in spending choices, labour markets and consumer prices.” Recent trends in the U.S. labor market reveal an increase in unemployment rates and a decline in job openings. Moreover, the rising costs of goods and services have contributed to inflation, particularly affecting food prices and the manufacturers' suggested retail prices (MSRPs) of various products. A collaborative study by Duke University and the Federal Reserve Banks of Richmond and Atlanta highlighted that tariffs are a primary concern for U.S. companies, with CFOs estimating that approximately one-third of price increases result from changes in trade policy. They further project that tariffs will account for around one-quarter of price hikes by 2026. Conversely, while advanced and emerging economies face challenges, financial market conditions have begun to ease, hinting at a possible decline in inflation across most G20 nations. The OECD has forecasted that headline inflation, encompassing a varied range of goods and services, will decrease from 3.4% in 2025 to 2.9% in 2026. Core inflation, which excludes volatile categories like food and energy, remains steady at 2.6% this year but is expected to dip slightly to 2.5% in 2026. However, analysts caution that significant risks linger regarding the economic outlook. They stated, “Further increases in bilateral tariff rates, a resurgence of inflationary pressures, increased concern about fiscal risks, or substantial risk repricing in financial markets could all lower economic growth relative to the baseline.” Potential avenues for economic recovery could emerge if trade restrictions are eased. The tariffs are currently subject to legal challenges in the Supreme Court, which has scheduled hearings for early November, and ongoing trade negotiations could also influence future economic conditions. Additionally, advancements in artificial intelligence technologies may offer prospects for growth. To mitigate pervasive inflation and stabilize GDP growth, the OECD emphasizes the importance of cooperative engagement within the global trading system. Efforts should focus on enhancing trade policy transparency and predictability while addressing broader economic security concerns.