The Organisation for Economic Co-operation and Development (OECD) has adjusted its growth forecasts downward for both the U.S. and the global economy, attributing these cuts to economic turmoil driven by President Donald Trump’s tariff policies.
The revised forecast places U.S. economic growth at a modest 1.6% for this year, with a further decline to 1.5% in 2026. Just a few months earlier, in March, the OECD had anticipated a more robust growth rate of 2.2% for 2025.
Factors contributing to this downgrade include the repercussions of Trump’s tariff strategies, increased uncertainty in economic policies, a slowdown in net immigration, and a reduction in the size of the federal workforce.
On the global scale, growth expectations have also been tempered, particularly in North America, as the OECD highlighted that the deceleration is mostly occurring in the United States, Canada, and Mexico, while other economies may experience only minor adjustments to their forecasts.
“Global GDP growth is expected to decline from 3.3% in 2024 to 2.9% in 2025 and 2026, assuming that tariff rates remain at their mid-May levels despite ongoing legal battles,” the OECD stated, revising earlier predictions of 3.1% for this year and 3% in 2026.
The OECD’s report characterized the global economic landscape as increasingly fraught with challenges, emphasizing that rising trade barriers, tighter financial conditions, diminished business and consumer confidence, and increased policy uncertainty could severely impact growth if they persist.
Continual adjustments to tariff regulations have created volatility within global markets. Recent developments include the U.S. Court of International Trade overturning certain country-specific tariffs before an appeals court reinstated them, coupled with Trump’s announcement of a potential doubling of steel tariffs to 50%.
The OECD also revised its inflation expectations, noting that “escalating trade costs, particularly in nations imposing tariffs, will drive up inflation, although this effect may be partially mitigated by declining commodity prices.”
The effects of tariffs on inflation have sparked significant debate, with central bank officials and global analysts expressing uncertainty about how levies will influence prices, dependent largely on possible countermeasures.
According to the OECD’s inflation forecast, a notable divergence is emerging between the U.S. and other major global economies. While G20 countries are projected to experience 3.6% inflation in 2025—down from an earlier estimate of 3.8%—the forecast for the U.S. has increased to 3.2%, up from the previous figure of 2.8%.
The OECD further indicated that U.S. inflation could approach 4% by late 2025.
