OECD Cuts Global Growth Forecast Amid U.S. Tariff Escalation

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The Organisation for Economic Co-operation and Development (OECD) has lowered its global growth forecast for 2025 and 2026, citing rising trade tensions and mounting economic uncertainty. In its latest report released Tuesday, the OECD projected global GDP growth at a modest 2.9% for both years, down from its previous estimates of 3.1% for 2025 and 3.0% for 2026.

The Paris-based group attributed the downgrade largely to U.S. President Donald Trump’s aggressive tariff measures, which have unsettled global financial markets. The OECD warned that increased trade barriers, along with tighter financial conditions and declining business and consumer confidence, are contributing to a weakening global economic outlook.

The organisation noted that nearly all economies would feel the effects, but the U.S. is expected to bear the brunt of the slowdown. The OECD downgraded U.S. growth from 2.2% to 1.6% in 2025 and expects a further decline to 1.5% in 2026. It also flagged that the effective U.S. tariff rate has jumped from 2% in 2024 to 15.4%—a level not seen since 1938.

U.S. Faces Domestic Pressures as Inflation Rises

The report also cited a range of domestic pressures in the United States, including reduced federal workforce numbers, lower net immigration, and high policy uncertainty. These factors are expected to curb consumer spending and reduce business investment. Although inflation is forecasted to ease across most G20 countries, the U.S. is an exception, with consumer price growth expected to approach 4%—twice the Federal Reserve’s target.

OECD Chief Economist Alvaro Pereira emphasised the importance of avoiding further trade fragmentation and encouraged nations, including the U.S., to pursue cooperative solutions. He suggested that global economic performance would be stronger if countries opted for dialogue over protectionism.

Negotiations between U.S. and EU trade officials are expected to take place alongside an OECD ministerial meeting in Paris this week, as tensions escalate over potential 50% tariffs on European imports.