The global economy strengthened as a result of robust investment growth, trade and higher employment, and growth in 2018 is expected to be faster than 2017, the Paris-based organisation said in its latest Interim Economic Outlook. 

But tensions are rising and could be a threat to strong and sustainable growth, it added.

“Growth is steady or improving in most G20 countries and the expansion is continuing,” said OECD acting chief economist Alvaro Pereira.

“In this environment, an escalation of trade tensions would be damaging for growth and jobs. Countries should rely on collective solutions like the Global Forum on Steel Excess Capacity to address specific issues. Safeguarding the rules-based international trading system is key,” he added.

The outlook comes as US president Donald Trump threatened a trade war by imposing tariffs on steel and aluminium, prompting retaliation from other countries. 

The OECD pointed out “a number of financial sector risks and vulnerabilities, as well as those posed by a rise in protectionism” could harm the economic recovery.

The OECD expects the global economy to grow by 3.9% in both 2018 and 2019, with private investment and trade picking up on the back of strong business and household confidence.

It also said that the global economy could see a short-term boost as a result of Trump’s tax reforms and expected spending increases in the US, as well as a fiscal stimulus in Germany.

The think-tank called on countries to add “dynamism to structural reform efforts”, particularly in the areas of taxation and skills, to enable employment and growth over the long term.