China’s economy is set to slow further as a result of new tariffs imposed by U.S. President Donald Trump, with global repercussions, the Organisation for Economic Cooperation and Development (OECD) predicted. According to its latest outlook, the Chinese economy will likely grow by 4.8% this year before slowing to 4.4% in 2026. The organization attributed part of the deceleration to the 20-percentage-point increase in tariffs imposed by the U.S. 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 Trump started in his first term.
Last month, Trump signed executive orders imposing a 10% 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% tariffs on U.S. coal, liquefied natural gas (LNG), oil and agricultural machinery. In response, Washington raised tariffs further to 20% on March 4 – and Beijing came back with additional tariffs on U.S. chicken, wheat, corn, cotton, sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products.
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% in 2025 – but that the tariffs could lead to price increases in some sectors. 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 South China Morning Post reports.
