OECD Lowers Growth Projections for US and Global Economy
The Organisation for Economic Co-operation and Development (OECD) has sharply reduced its economic growth forecasts for both the United States and the global economy. The downgrade reflects rising concerns over trade tensions, particularly those linked to tariff policies, and growing economic uncertainty.
Revised US Growth Outlook
The US economy is now expected to expand by just 1.6% in 2025 and 1.5% in 2026, a significant cut from the 2.2% growth projected earlier in March 2025. Factors contributing to this downgrade include ongoing tariff disputes, elevated policy uncertainty, a slowdown in net immigration, and reductions in the federal workforce size.
Global Economic Slowdown Concentrated in North America
Globally, growth forecasts were also trimmed, with the OECD projecting global GDP growth slowing from 3.3% in 2024 to 2.9% in both 2025 and 2026. The report highlights that this slowdown is primarily driven by economic deceleration in the United States, Canada, and Mexico, while other regions faced relatively smaller downward revisions.
“Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist,” the OECD warns.
Impact of Tariffs and Trade Uncertainty
The uncertainty surrounding trade policies remains a significant drag on economic performance. Frequent changes in tariff regulations, including recent legal battles over country-specific levies and discussions of increased steel tariffs, have unsettled global markets. These disruptions have complicated business planning and confidence worldwide.
Inflation Forecasts Adjusted Amid Rising Trade Costs
Alongside growth revisions, the OECD updated its inflation outlook to reflect the effects of increased trade costs. In countries implementing higher tariffs, inflation is expected to rise, although the impact may be moderated by declining commodity prices.
Key inflation projections include:
- G20 inflation now forecast at 3.6% for 2025, down slightly from 3.8% in the previous forecast.
- US inflation forecast increased to 3.2% for 2025, up from 2.8%, with a possibility of approaching 4% by late 2025.
These divergent trends highlight the uneven effects of tariff policies on different economies and amplify uncertainty about future price pressures.
Summary
Overall, the OECD signals a challenging economic environment ahead, shaped by trade disputes, policy unpredictability, and shifting labor and demographic patterns. The updated forecasts underscore the risks facing both the US and global economies, emphasizing the need for stable policy frameworks to support growth and price stability.
