This comes as Treasurer Jim Chalmers on Tuesday addressed reporters ahead of next week’s budget where he tore into the “unnecessary” levies.

A new Organisation for Economic Co-operation and Development (OECD) report projected lower growth across the world, with Australia suffering one of the worst blows amongst the group compared to forecasts delivered in December.

Australia is on track for growth of 1.9 per cent in 2025, up from 1.1 per cent last year, while projections for next year are 1.8 per cent, which is 0.7 per cent lower than the December forecast.

The nation’s 2026 downgrade makes it the third worst slump behind Mexico and Canada which will both be directly impacted by the US President’s 25 per cent tariffs.

Canada will experience back-to-back growth of 0.7 per cent over the next two years, a 1.3 per cent downgrade for each year, while Mexico’s forecasts have dropped 2.5 and 2.2 per cent respectively.

The chief economist at AMP Shane Oliver told SkyNews.com.au the risk to Australia’s economy from the tariffs was through flow on effects of the 20 per cent tariffs Trump has slapped on Chinese-made goods.

“There’s a risk to Chinese growth from these tariffs and a trade war flowing from that. That’s where Australia is vulnerable and that’s largely why the OECD has revised our forecast,” Mr Oliver said.

“If we didn’t have the uncertainty around Trump and his trade war then we probably would have been looking at much better growth.”

Backing in Mr Oliver's point was Michael Fingland, the CEO of consultancy business Vantage Performance, who said Australia faces "indirect fallout" from US-China trade frictions and potential spillovers affecting North American economies.

"Even before the tariffs, China’s demand for iron ore was already slowing," Mr Fingland told SkyNews.com.au.

Australia is directly impacted by 25 per cent tariffs on steel and aluminium, however, Mr Chalmers on Tuesday said the direct hit to the nation’s GDP would be less than 0.02 per cent by 2030.

But he stressed the indirect effects would pose a 0.1 per cent hit by 2030.

“Over a range of scenarios, Treasury found the indirect GDP impacts of a trade war could be up to four times larger than the direct effects of tariffs on our economy,” Mr Chalmers said.

Mr Oliver stressed the tariff setback to Australia’s growth was “not disastrous” as the nation is on track to perform better than in 2024.

“Last year our economy only grew 1.1 per cent so we’re talking about 1.8 per cent in 2026, it’s still an improvement on last year and likewise for the global economy,” he said.

Headline inflation in Australia is expected to drop within the RBA’s 2-3 per cent target band over 2025 and 2026, however, the OECD said “heightened political uncertainty” and further trade disruption means inflation could fall slower than expected.

“Increasing trade restrictions will contribute to higher costs both for production and consumption,” OECD secretary-general and former finance minister Mathias Cormann said.

“It remains essential to ensure a well-functioning, rules-based international trading system and to keep markets open.”

The OECD could further downgrade Australia's 2026 growth forecast if the trade war were to intensify or if domestic inflation stayed "stickier than expected", Mr Fingland said.

"The cost-of-living crisis is really hurting a lot of families, so discretionary spending will remain subdued for some time," he said.

Trump’s tariffs were criticised by Mr Chalmers on Tuesday as he prepares to hand down his fourth budget in a week’s time.

“In a world of retaliation and escalation, the impacts of tariffs are amplified, they linger for longer, resulting in a bigger reduction in GDP and a bigger increase in prices,” the Treasurer said.

Australia could face further tariffs outside of the current 25 per cent tax on aluminum and steel in Trump’s next series of trade taxes with the nation’s beef and pharmaceuticals exposed, according to The Australian Financial Review.

Tariffs of between two and eight per cent could be slapped on an array of Australia’s $30b of exports sold to the United States.

Mr Chalmers was questioned about this report during an appearance on ABC Radio National where he said it “remains to be seen”.

“Obviously there's a lot of discussion in both countries and around the world about what the next steps may look like in terms of trade policy out of the US,” he said.

He also described the tariffs as “self-defeating … self-sabotaging” and a “recipe for less growth and higher inflation” across the globe.

“That's one of the reasons why the OECD overnight downgraded their expectations for growth, because of these trade barriers and this escalation of trade tensions,” Mr Chalmers said.

“It's very concerning to us as a trade exposed country, and that's why we engage where we can in the most meaningful way we can to put Australia's case.”

Mr Chalmers has warned ex-tropical Cyclone Alfred will cost the Australian economy at least $1.2 billion.

The hit will further compound pressures on inflation and the federal budget in the lead-up to election, to be held on or before May 17.