The Organisation for Economic Co-operation and Development (OECD) has lowered its economic growth forecasts for the United States and the global economy for 2025 and 2026, citing rising trade barriers, policy uncertainty, and their ripple effects on confidence and investment. The Paris-based OECD now projects U.S. GDP growth to slow to 1.6% in 2025 and 1.5% in 2026, down from earlier estimates of 2.2% and 1.6%, respectively.
This revision marks a significant downgrade from the March outlook and reflects the growing impact of tariffs and trade tensions, particularly those linked to policies introduced under President Donald Trump. The OECD highlights that despite some recent tariff concessions, the effective tariff rate on U.S. imports remains above 15%, continuing to elevate import prices and inflationary pressures.
Globally, the OECD trimmed its growth forecast to 2.9% for both 2025 and 2026, down from 3.1% and 3.0% projected earlier this year. The slowdown is expected to be most pronounced in major economies such as the United States, Canada, Mexico, and China. For example, China’s growth is forecast to ease from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026, while the euro area is expected to see modest growth improvements from 0.8% in 2024 to 1.0% and 1.2% over the next two years.
The OECD report underscores several risks to the economic outlook. Heightened trade barriers and the potential for further tariff hikes could disrupt global supply chains and dampen cross-border investment. In addition, inflation remains a concern, with OECD-wide inflation now expected to reach 4.2% this year, a half percentage point higher than six months ago. The organization warns that inflation could prove more persistent, especially in economies facing higher trade costs or tight labor markets, potentially prompting more restrictive monetary policies that could further constrain growth.
The impact of tariffs is not limited to inflation. The OECD notes that while tariffs may encourage some domestic manufacturing, they reduce consumers’ purchasing power and discourage corporate investment. The revenue generated from tariffs only partially offsets losses from slower economic growth and tax cuts, adding fiscal strain.
Despite the gloomy tone, the OECD’s outlook still anticipates positive, if modest, growth in nearly all member economies in 2025, with Austria as the sole exception. The organization emphasizes that an early rollback of trade barriers could improve growth prospects and alleviate inflationary pressures. Moreover, geopolitical developments, such as a peaceful resolution to conflicts like Russia’s war in Ukraine and tensions in the Middle East, could bolster confidence and investment incentives.
OECD Secretary-General Mathias Cormann stressed the importance of governments engaging constructively to address trade issues, maintain open markets, and preserve the benefits of rules-based global trade, which underpins competition, innovation, and productivity.
The revised forecasts align broadly with projections from major financial institutions. For instance, Goldman Sachs and Citi have forecasted U.S. growth at 1.3% and 1.4%, respectively, for 2025, reflecting a consensus that the U.S. economy will face headwinds from ongoing trade tensions and policy uncertainty.
The OECD’s latest economic outlook paints a cautious picture for the U.S. and global economies. Trade policy uncertainty, particularly tariffs, remains a key factor slowing growth and fueling inflation. The path forward depends heavily on whether recent trade barriers persist or are rolled back, and on the resolution of geopolitical conflicts that influence market confidence and investment decisions.
