Trump Trade War to Sap Canadian, Mexican and US Growth, OECD Says 

Lumber is piled at a housing construction site, Thursday, June 24, 2021, in Middleton, Mass. (AP)
Lumber is piled at a housing construction site, Thursday, June 24, 2021, in Middleton, Mass. (AP)
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Trump Trade War to Sap Canadian, Mexican and US Growth, OECD Says 

Lumber is piled at a housing construction site, Thursday, June 24, 2021, in Middleton, Mass. (AP)
Lumber is piled at a housing construction site, Thursday, June 24, 2021, in Middleton, Mass. (AP)

President Donald Trump's tariff hikes will drag down growth in Canada, Mexico and the United States while driving up inflation, the OECD forecast on Monday, cutting its global economic outlook and warning that a broader trade war would sap growth further.

In the case of a generalized trade shock, not only will US households pay a high direct price, but the likely economic slowdown will cost the United States more than the extra income the tariffs are supposed to generate, the Organization for Economic Cooperation and Development estimated in its interim outlook.

Global growth is on course to slow slightly from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, the Paris-based policy forum said, cutting its projections from 3.3% for both this year and next in its previous economic outlook, issued in December.

But the global picture masked divergences among major economies with resilience in some big emerging markets like China helping to make up for a marked slowdown in North America.

The proliferation of tariff hikes would weigh on global business investment and boost inflation, leaving central banks little choice but to keep interest rates higher for longer than previously expected, the OECD said.

The organization updated its forecasts assuming tariffs between the United States and its neighbors are raised an extra 25 percentage points on almost all goods imports from April.

As a result, US economic growth was seen slowing this year to 2.2% before losing more steam next year to only 1.6%, the OECD said, cutting its forecasts from 2.4% and 2.1% previously.

But the Mexican economy would be hit hardest by the tariff hikes, contracting 1.3% this year and a further 0.6% next year instead of growing 1.2% and 1.6% as previously expected.

Canada's growth rate would slow to 0.7% this year and next, well below the 2% previously forecast for both years.

TRADE WAR FALLOUT

With less direct exposure to the trade war for now, the euro area economy was seen gaining momentum this year with 1.0% growth and reaching 1.2% next year, although that was down from previous forecasts for 1.3% and 1.5% respectively.

Stronger government support for Chinese growth would help offset the impact of higher tariffs in the world's second-biggest economy, the OECD said, forecasting 4.8% growth in 2025 - up from 4.7% - before slowing to 4.4% in 2026 - unchanged from the previous estimate.

However, the OECD said the global outlook would be much worse if Washington escalates the trade war by raising tariffs on all non-commodity imports and its trade partners do the same.

It estimated an increase in bilateral tariffs permanently by 10 percentage points would shave around 0.3 percentage points off global growth by the second and third years of the shock, while global inflation would be on average 0.4 percentage points higher over the first three years.

In such a scenario, the US economy would suffer a significant hit, with growth 0.7 percentage points lower than what it otherwise would have been by the third year. The direct cost to US households could be as much as $1,600 each.

The financial cost from the economic drag from tariffs would also offset any extra income they generate for the public coffers, which means they would be insufficient to pay for lowering other taxes as the US administration has planned.



Riyadh Real Estate Awaits Impact of Measures to Curb Price Surge

Residential and commercial properties in the Saudi capital Riyadh (Reuters)
Residential and commercial properties in the Saudi capital Riyadh (Reuters)
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Riyadh Real Estate Awaits Impact of Measures to Curb Price Surge

Residential and commercial properties in the Saudi capital Riyadh (Reuters)
Residential and commercial properties in the Saudi capital Riyadh (Reuters)

The Saudi real estate market is currently in a state of cautious anticipation, driven by unprecedented decisions and measures announced by Crown Prince Mohammed bin Salman.

These steps aim to increase the supply of properties and restore balance in the market to address the rising costs of land and rental prices.

Data from the market shows a stagnation in property purchases by citizens, as they await the impact of these measures, hoping they will bring stability to property prices in Riyadh and lower costs.

In March, the Crown Prince directed the implementation of a series of regulatory measures, including lifting restrictions on the development of over 81 square kilometers of land north of Riyadh.

This move is expected to deliver tens of thousands of affordable residential plots annually to citizens, following a significant rise in property prices in Riyadh.

According to Saudi Minister of Municipal and Rural Affairs and Housing Majid Al-Hogail, these measures will add between 10,000 and 40,000 plots of land annually in the northern region of Riyadh, ensuring a better balance between supply and demand in the market.

The Crown Prince has already donated 1 billion riyals to the National Developmental Housing Foundation (Sakan), represented by Jood Eskan, to support home ownership for eligible families across Saudi Arabia.

The housing projects funded by this donation are to be completed within 12 months and executed by national companies.

The Crown Prince also ordered monthly progress reports to ensure that all residential units are delivered within one year.

Real estate market experts told Asharq Al-Awsat that current market data reveals a stagnation in property purchases by citizens, as they await the impact of recent policy changes and their potential to restore balance to the market.

Many real estate companies and agencies have observed a decline in sales activity, with property marketers facing difficulties in encouraging buyers who prefer to delay decisions until the effects of Crown Prince Mohammed bin Salman’s directives take shape.

Real estate expert and marketer Abdullah Al-Mousa told Asharq Al-Awsat that the current stagnation in property prices in Riyadh is a direct result of the Crown Prince’s initiatives to increase property supply, which aim to restore price equilibrium following the recent surge in real estate costs.

He views the decline as a positive step toward balancing supply and demand, contributing to a more sustainable and fair market for all stakeholders.

Al-Mousa anticipates that this stagnation will persist until all government directives are fully implemented in the coming months.

He noted that, with plans to increase the property supply, the market could experience gradual recovery in the long term, especially given Riyadh’s continued population and economic growth.

The expert highlighted that several factors may sustain the current stagnation, including high interest rates, which reduce citizens’ purchasing power, the oversupply of properties relative to demand, and global economic fluctuations that could affect investments.

However, he emphasized that Riyadh’s ongoing population growth, improving national economy, rising per capita income, large-scale infrastructure projects like the Riyadh Metro, and continued government support for housing programs are expected to drive the recovery of the real estate market.

Al-Mousa also predicted further improvement in the sector as policies are implemented and market conditions are monitored.