Economic growth forecasts for the United States and globally have been revised downward by the Organisation for Economic Co-operation and Development (OECD), reflecting persistent uncertainties stemming from President Donald Trump’s trade policies, particularly his approach to tariffs. The OECD’s latest report indicates a U.S. growth projection of merely 1.6% for this year and 1.5% in 2026, a significant decrease from the previous March forecast of a 2.2% expansion in 2025. This shift in outlook is attributed to several key factors, including elevated economic policy uncertainty, a slowdown in net immigration, and a reduction in the federal workforce.
The implications are crucial, as global economic growth is also expected to fall short of previous forecasts, particularly in North America. The OECD highlighted that the slowdown is most pronounced in the United States, Canada, and Mexico, regions heavily intertwined through trade and economic activity. Global GDP growth is anticipated to decline from 3.3% in 2024 to 2.9% in both 2025 and 2026, operating on the technical assumption that existing tariff rates will remain in effect, despite ongoing legal disputes surrounding them.
The OECD report underscores a bleak global economic outlook, emphasizing that considerable increases in trade barriers, stricter financial conditions, diminished confidence among businesses and consumers, and rising policy uncertainty are collectively exerting significant adverse effects on growth prospects. This perspective correlates with widespread concerns among economists and market analysts regarding the ongoing volatility in tariff regulations, which has created an unpredictable environment for trade and investment.
Recent developments in the U.S. trade landscape have only heightened this uncertainty. Court rulings have played a pivotal role in shaping the trajectory of tariffs, with recent decisions both overturning and reinstating specific country-targeted levies. Additionally, President Trump has signaled intentions to double duties on steel imports to 50%, further complicating the trade environment. These actions have caused fluctuations in market confidence and uncertainty, casting doubt on the stability of supply chains and overall economic performance.
The OECD has also updated its inflation forecasts, noting that increased trade costs arising from tariff hikes, particularly in countries imposing these levies, are expected to elevate inflation rates. However, this inflationary pressure may be counterbalanced by declining commodity prices, leading to a complex interplay in pricing dynamics. The debate surrounding the impact of tariffs on inflation remains contentious, with central bankers and economic analysts emphasizing the ambiguous nature of these effects, which will be highly dependent on potential counter-measures and adjustments made by trading partners.
Turning to specific forecasts, the OECD anticipates inflation in G20 countries will average 3.6% in 2025, a slight decrease from March’s estimate of 3.8%. In contrast, the projected inflation rate for the United States has risen to 3.2%, up from a previous estimate of 2.8%. This uptick reflects the growing concern that U.S. inflation may approach 4% by late 2025. Several factors contribute to these rising projections, including supply chain disruptions, labor market constraints, and the ongoing influence of tariffs and trade barriers.
In summary, the economic landscape painted by the OECD reflects a cautious outlook rooted in the changing dynamics of trade policy and its ripple effects on growth and inflation. The downward adjustments in growth forecasts for both the United States and the global economy signal a need for stakeholders to navigate these uncertain waters with strategic foresight. Policymakers, businesses, and consumers alike will need to remain vigilant as the interplay of tariffs, inflation, and broader economic conditions evolves in the coming months and years. The OECD’s report serves as a critical reminder of the challenges that lie ahead and the intricate connections that underpin the global economy.