The US and global economy are losing steam, and a key forecaster said President Donald Trump’s trade tariffs were part of the reason.
In its latest Economic Outlook, released on Tuesday, the Paris-based Organization for Economic Co-operation and Development cut its forecast for US economic growth in 2025, pointing to the fallout from the administration’s trade policies. The 2.8% rate it predicted in March has now been reduced to 1.6%.
The OECD warned that these tariffs, which have pushed the effective US import rate to 15.4% — the highest since 1938 — were not only affecting US growth but reverberating across the global economy too.
Global growth was now projected to slow to 2.9% in both 2025 and 2026, down from 3.3% in 2024.
The OECD said the slowdown in growth was concentrated in the US, Canada, Mexico, and China. Growth in China, the world’s second-largest economy, was expected to fall to 4.7% in 2025, down from 5% last year, and come in at 4.3% in 2026.
As of May 27, a blanket 10% tariff applies to all goods imported into the US, with some limited exemptions.
Stoking inflation
A 50% tariff on imports from the European Union were paused until July 7 amid “fast-tracked” negotiations, while steep levies on imports from China have also been put on hold.
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The OECD said these policies were eroding investment, disrupting supply chains, and stoking inflation — especially in the US, where price growth is now projected to approach 4% by the end of the year.
OECD secretary-general Mathias Cormann said governments needed to work to keep markets open and preserve the “economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth.”
Chief economist Álvaro Pereira added: “Lower growth and less trade will hit incomes and slow job growth.”
The organization urged governments to de-escalate tensions and roll back tariffs to avoid further damage to the global economy.
In a Monday note, Deutsche Bank economists said there were global signs of a “turbulent but sustained path toward trade de-escalation. The fallout from the US ‘Liberation Day’ policies — from falling approval ratings to a sell-off in US government bonds — forced a rethink in Washington. While recent court rulings could pave the way for an even more benign trade regime, they also prolong uncertainty.”
The bank also expected US GDP to grow by 1.6% this year and by 1.7% in 2026 on an annual average basis.
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