The Organisation for Economic Co-operation and Development (OECD) has downgraded its forecast for global economic growth, citing growing challenges posed by escalating tariffs that are hurting the U.S. economy.
The OECD lowered its 2025 global GDP growth estimate to 2.9%, down from a previous forecast of 3.1%. The outlook for 2026 was also revised downward slightly to 2.9% from 3.0%.
Rising trade barriers and heightened policy uncertainty continue to threaten economic expansion, the OECD warned, pointing out that tariff increases might drive inflationary pressures. However, this effect could be partly offset by easing commodity prices.
Still, the organization emphasized that risks remain “substantial.” According to the OECD, “Key concerns include further escalations or sudden shifts in trade policies, more cautious behaviour from consumers and businesses, and continued repricing of risk in financial markets.” They added that an “early reversal” of trade tensions could help stimulate growth and reduce inflation.
These observations come as markets weigh the consequences of U.S. President Donald Trump’s aggressive tariff policies. Trump has defended these measures as necessary steps to strengthen government revenue, bring manufacturing jobs back to the U.S., and correct longstanding trade imbalances.
With a 90-day pause on the extensive reciprocal tariffs set to expire in July, the White House is rushing to finalize a series of individual trade agreements. Officials have previously indicated plans to secure numerous deals during this suspension, a move partially triggered by financial markets’ negative reactions to the initial tariff announcements at the “Liberation Day” event in early April.
Reuters reports that the Trump administration has asked trading partners to submit their best offers by Wednesday as negotiations intensify.
Despite the temporary halt, some tariffs remain in place, including a universal 10% levy and duties on steel and aluminum imports.
While concerns persist that these levies could fuel inflation and slow economic growth, the U.S. economy has shown notable resilience. Upcoming labor market data and consumer price reports, expected later this week and next, will shed further light on the tariffs’ economic impact.
Nonetheless, the OECD has cut its U.S. growth forecast for 2025 to 1.6% from 2.2%, stating that the outlook for the world’s largest economy has “deteriorated.” These projections assume current tariffs remain through the end of 2025 and 2026.
The tariff measures are also expected to slow growth in China, the second-largest global economy, though this may be partially balanced by government subsidies targeting consumer goods, the OECD noted. Reflecting this pressure, a private survey revealed that Chinese factory activity contracted for the first time in eight months in May.