An escalation in the trade war between the US and China could take a heavy toll on global growth by 2021, creating price pressures that would force the Federal Reserve to step up monetary tightening, the OECD warned on Wednesday.
With the global expansion past its peak, there was a risk that tit-for-tat trade restrictions could turn a soft landing for the world economy into a hard one, the Paris-based international organisation said in its latest economic outlook.
“We’re not talking about a plateau [of growth] any more, but a slowdown,” said Laurence Boone, the OECD’s chief economist. The organisation expects global growth to ease from 3.7 per cent this year to 3.5 per cent in 2019 and 2020 — a slight downgrade from its last forecast but still a healthy rate of expansion.