The OECD said that if governments continue to hesitate about how to respond, the global economy risks entering a new stage of sustained low growth.
The OECD said that the global economy will achieve the smallest growth rate since the 2008-2009 financial crisis this year, slowing to 2.9% from 3.6% last year, and is expected to grow by 3.0% in 2020.
OECD points out that the economic outlook has deteriorated further since the last update in May, when it predicted that the global economy will grow by 3.2% this year and 3.4% in 2020.
Laurence Boone, chief economist of the OECD, told Reuters: "What seemed to be a temporary trade tension is transforming into a new and lasting state of trade relations."
"The global order governing trade has ceased to exist, and we are in a new era of less definite, more bilateral and sometimes more arbitrary trade relations," she added.
Boone said trade growth, once the engine of global recovery after the financial crisis, has now fallen from 5% in 2017 to negative.
At the same time, trade tensions have put pressure on business confidence, reducing investment growth from 4% two years ago to only 1%.
Boone said there was evidence that the trade impasse was damaging the U.S. economy, causing shocks to some manufacturing products and causing farm bankruptcies.
The OECD expects the U.S. economy, the world's largest economy, to grow by 2.4% this year and 2.0% next year, instead of the 2.8% and 2.3% predicted in May.
** Britain's withdrawal from Europe**
China, the world's second largest economy, is expected to grow at 6.1% and 5.7% in 2019 and 2020, compared with 6.2% and 6.0% for the OECD.
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