In a recent assessment, the Organisation for Economic Co-operation and Development (OECD) has downgraded its economic growth forecasts for both the United States and the global economy, attributing the revisions to the ongoing impacts of President Donald Trump’s contentious tariff policies. The OECD now anticipates U.S. growth will slow to 1.6% this year and 1.5% in 2026, a sharp decrease from its previous prediction of 2.2% expansion in 2025. The report highlights consequences triggered by elevated policy uncertainty, a deceleration in net immigration, and a reduced federal workforce.
Globally, growth prospects have diminished as well, particularly in North America, with the OECD emphasizing that “the slowdown is concentrated in the United States, Canada, and Mexico.” This revised report indicates a dip in projected global GDP growth from 3.3% in 2024 to 2.9% for the upcoming years. Such forecasts rest on the assumption that current tariff rates will remain unchanged despite ongoing legal disputes over their implementation.
The OECD’s findings portray a daunting global outlook, noting that increased trade barriers, tighter financial conditions, and declining consumer confidence severely threaten future growth. Recent sporadic changes in tariffs-such as a U.S. Court of International Trade striking down Trump’s country-specific levies only to have them reinstated by an appeals court-further complicate economic stability. Notably, Trump’s proposal to double steel duties to 50% adds to uncertainties in global markets.
OECD Chief Economist Alvaro Pereira underscored the profound impact of these uncertainties on consumption and investment patterns during a recent interview with CNBC. He stated, “Trade uncertainty and economic policy uncertainty have reached unprecedented levels,” leading to decreased activity indicators, lower growth rates, fewer job opportunities, and rising inflationary pressures.
The OECD has also revised its inflation forecast, predicting that escalating trade costs due to heightened tariffs will likely exacerbate inflation, despite potential offsets from softer commodity prices. The debate regarding tariffs and inflation remains contentious among policymakers and analysts alike, with varying perspectives on the extent of tariffs’ impact on prices. Currently, while G20 nations are projected to maintain a 3.6% inflation rate in 2025, the U.S. figures have surged to 3.2%, a rise from the previous 2.8%. By late 2025, U.S. inflation could approach nearly 4%.
In a branched discussion on technological advancements, Pereira emphasized the potential for the U.S. to enhance productivity through innovations in AI and robotics. He suggested that these developments could widen the productivity gap with other nations. “If we manage to lower trade barriers and foster investment and consumption through international trade agreements-particularly with China and other regions-we may be on the brink of a significant productivity revival,” he remarked.
This multifaceted evaluation from the OECD sends a strong message about the interconnectedness of trade, policy, and economic vitality. With global economic pressures intensifying, stakeholders across all sectors are urged to remain vigilant as they navigate a highly uncertain landscape.
Tags: Economic Growth, OECD, Trade Policies, Inflation, U.S. Economy, Global Economy, Technology, AI.
Original Source: https://www.cnbc.com/2025/06/03/us-growth-forecast-cut-further-by-oecd-as-trump-tariffs-sour-outlook.html
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Publish Date: 2025-06-03 15:13:00
