OECD Lowers Global Growth Projections for 2025 and 2026 to 2.9%
The Organisation for Economic Co-operation and Development (OECD) has revised its global economic growth forecast, projecting a slowdown largely due to escalating trade tensions stemming from U.S. tariff policies. The OECD now anticipates a growth rate of just 2.9 percent for the world economy in both 2025 and 2026, a decrease from earlier estimates. The United States is expected to be particularly affected, with significant implications for global trade and economic stability.
OECD’s Revised Growth Projections
The OECD’s latest report indicates a notable decline in global economic growth expectations. Initially, the organization had forecasted a growth rate of 3.1 percent for 2025 and 3.0 percent for 2026. However, these figures have now been adjusted to 2.9 percent for both years. The report attributes this downward revision to the impact of new tariffs introduced by U.S. President Donald Trump, which have created uncertainty in global markets. The OECD warns that these trade barriers could lead to reduced business and consumer confidence, further exacerbating the economic slowdown.
The United States is projected to experience a significant deceleration in growth, with the OECD lowering its 2025 forecast from 2.2 percent to 1.6 percent. The outlook for 2026 is even bleaker, with an anticipated growth rate of just 1.5 percent. This stark contrast comes despite President Trump’s assertions that tariffs are benefiting the U.S. economy, as he recently claimed on social media that the economy is “BOOMING” due to these measures.
Impact of Tariffs on the U.S. Economy
The OECD’s report highlights the adverse effects of increased tariffs on the U.S. economy. The effective tariff rate on U.S. merchandise imports has surged from 2 percent in 2024 to 15.4 percent, marking the highest level since 1938. This rise in tariffs is expected to dampen household consumption and hinder business investment growth. The organization also notes that high economic policy uncertainty, a slowdown in net immigration, and a reduction in the federal workforce are contributing factors to the U.S. economic slowdown.
As the OECD convenes its ministerial meeting in Paris, U.S. and EU trade officials are expected to discuss these pressing trade issues. The meeting comes in the wake of Trump’s threats to impose 50-percent tariffs on European goods, further heightening tensions in international trade relations. OECD chief economist Alvaro Pereira emphasized the importance of reaching agreements to avoid further trade fragmentation, which could have detrimental effects on global growth.
Global Economic Outlook and Inflation Trends
The OECD’s report underscores that the weakened economic prospects will be felt worldwide, with almost no exceptions. Lower growth rates and reduced trade are anticipated to impact incomes and slow job growth across various economies. While inflation in the Group of 20 (G20) economies is projected to moderate, the U.S. is expected to see inflation rise to just under 4 percent by the end of the year, significantly above the Federal Reserve’s target rate.
China’s growth forecast has also been slightly adjusted, now projected at 4.7 percent for 2025, down from 4.8 percent. This adjustment reflects the impact of U.S. tariffs on Chinese goods, although some of these tariffs have been temporarily eased. Japan’s growth outlook has been revised down from 1.1 percent to 0.7 percent, while the eurozone maintains a steady growth forecast of 1 percent.
The OECD warns that the risk of increased protectionism and trade policy uncertainty remains high, which could lead to the introduction of additional trade barriers. Such developments would further diminish global growth prospects and exacerbate inflationary pressures, creating a challenging economic environment for countries worldwide.
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