OECD Revises Global Growth Forecast Amid Escalating Trade Tensions
The Organisation for Economic Co-operation and Development has cut its global growth predictions for 2025 and 2026, citing rising trade barriers and economic uncertainty.
The Organisation for Economic Co-operation and Development (OECD) has significantly revised its annual global growth forecasts, warning that escalating trade tensions, particularly driven by recent tariffs imposed by the United States, are likely to hinder the world economy.
In a new report released on June 3, the Paris-based organization projected global economic growth to be 'modest', predicting a rate of 2.9% for both 2025 and 2026, down from previous estimates of 3.1% and 3.0% respectively.
The OECD highlighted that these changes came in light of a series of tariffs announced by U.S. President Donald Trump, which have contributed to heightened uncertainty and volatility in financial markets.
According to the OECD, the new forecast reflects expectations that increased trade barriers, alongside tightened financial conditions, will adversely affect both business investments and consumer confidence.
At the center of the OECD’s revised outlook is the economic performance of the United States, which has been notably affected.
The OECD has lowered its growth forecast for the U.S. economy, now estimating an increase of just 1.6% for 2025 compared to earlier projections of 2.2%.
This is expected to decline further to 1.5% in 2026. The OECD attributed this downward revision to higher effective tariff rates on imports, which have surged from approximately 2% to 15.4%, marking the highest level since 1938.
In the context of a broad impact, the OECD noted that the weakening economic prospects would reverberate globally, stating that 'almost no exception' would be immune from these effects.
Slower growth and a reduction in trade are anticipated to dampen income levels, which in turn may slow job growth across various economies.
Current inflation rates further complicate the economic picture.
While inflation across the Group of 20 economies is expected to moderate to around 3.6% in 2025, the United States is projected to experience a rise in inflation to nearly 4% by the end of the current year.
This rate is notably higher than the Federal Reserve's target of 2%, signaling potential challenges ahead for U.S. monetary policy.
The OECD also has lowered its growth forecasts for other economies, including a slight reduction for China from 4.8% to 4.7% for the current year, and for Japan, from 1.1% to 0.7%.
The growth outlook for the Eurozone has remained unchanged at 1%.
The cumulative effects of protectionism and ongoing trade policy uncertainties present risks of further trade barriers, which could exacerbate global inflation and diminish growth prospects.
As trade negotiations unfold, the OECD underscored the importance of dialogue among nations to prevent further fragmentation of trade relations.
The organization is set to hold a ministerial meeting in Paris, coinciding with discussions between U.S. and EU trade negotiators amidst heightened tensions regarding tariffs affecting international trade.
In a new report released on June 3, the Paris-based organization projected global economic growth to be 'modest', predicting a rate of 2.9% for both 2025 and 2026, down from previous estimates of 3.1% and 3.0% respectively.
The OECD highlighted that these changes came in light of a series of tariffs announced by U.S. President Donald Trump, which have contributed to heightened uncertainty and volatility in financial markets.
According to the OECD, the new forecast reflects expectations that increased trade barriers, alongside tightened financial conditions, will adversely affect both business investments and consumer confidence.
At the center of the OECD’s revised outlook is the economic performance of the United States, which has been notably affected.
The OECD has lowered its growth forecast for the U.S. economy, now estimating an increase of just 1.6% for 2025 compared to earlier projections of 2.2%.
This is expected to decline further to 1.5% in 2026. The OECD attributed this downward revision to higher effective tariff rates on imports, which have surged from approximately 2% to 15.4%, marking the highest level since 1938.
In the context of a broad impact, the OECD noted that the weakening economic prospects would reverberate globally, stating that 'almost no exception' would be immune from these effects.
Slower growth and a reduction in trade are anticipated to dampen income levels, which in turn may slow job growth across various economies.
Current inflation rates further complicate the economic picture.
While inflation across the Group of 20 economies is expected to moderate to around 3.6% in 2025, the United States is projected to experience a rise in inflation to nearly 4% by the end of the current year.
This rate is notably higher than the Federal Reserve's target of 2%, signaling potential challenges ahead for U.S. monetary policy.
The OECD also has lowered its growth forecasts for other economies, including a slight reduction for China from 4.8% to 4.7% for the current year, and for Japan, from 1.1% to 0.7%.
The growth outlook for the Eurozone has remained unchanged at 1%.
The cumulative effects of protectionism and ongoing trade policy uncertainties present risks of further trade barriers, which could exacerbate global inflation and diminish growth prospects.
As trade negotiations unfold, the OECD underscored the importance of dialogue among nations to prevent further fragmentation of trade relations.
The organization is set to hold a ministerial meeting in Paris, coinciding with discussions between U.S. and EU trade negotiators amidst heightened tensions regarding tariffs affecting international trade.