The Organisation for Economic Co-operation and Development (OECD) has once again revised down its growth forecasts for the United States and the global economy, citing the tariff chaos under the Trump administration as a key factor dampening the economic outlook. The organization now projects the US economy to grow by a mere 1.6% this year and 1.5% in 2026. This is a significant downgrade from its March prediction, when it expected the US economy to expand at a rate of 2.2% in 2025.
Reasons Behind the Downgrade
The latest downward adjustment of the growth forecasts is mainly due to several factors. These include the negative impact of Trump’s tariff policies, the increasing uncertainty in economic policies, the slowdown in net immigration, and the reduction in the size of the federal government workforce. The OECD also noted that the economic slowdown is not limited to the US. Global growth expectations have been lowered as well, with the organization stating that “the economic slowdown is concentrated in the United States, Canada, and Mexico”, while other economies have seen relatively smaller reductions.
Altered Global Growth Outlook
The OECD report states: “Based on the technical assumption that current tariffs will remain in place during judicial challenges, the global GDP growth rate is expected to decelerate from 3.3% in 2024 to 2.9% in both 2025 and 2026.” These figures represent a revision from the previous forecasts of 3.1% and 3% respectively. “The global outlook is becoming increasingly grim,” the report warns. “If trade barriers continue to increase significantly, the financial environment tightens, business and consumer confidence weakens, and policy uncertainty intensifies, they will all have a substantial negative impact on the growth outlook.”
Recent Tariff – Related Market Turmoil
In recent weeks, the frequent changes in tariff policies have continuously roiled the markets. Among the latest developments, Trump’s retaliatory tariffs on certain countries were initially invalidated by the US International Trade Court but later regained effect following an appeal. Additionally, Trump announced his intention to double steel tariffs to 50%.
Adjusted Inflation Expectations
The OECD has also adjusted its inflation expectations, stating that “increased trade costs – especially in countries that have raised tariffs – will drive up inflation. However, the weakening of commodity prices will partially offset this effect.” Currently, there is a vigorous debate about the impact of tariffs on inflation. Many central bank policymakers and global analysts believe that the specific impact of tariffs on prices remains uncertain and largely depends on factors such as countermeasures.
Divergent Inflation Outlooks
The OECD’s inflation outlook reveals a significant disparity between the United States and other major economies. The organization has lowered its forecast for the inflation rate of the G20 countries in 2025 from 3.8% in March to 3.6%. In contrast, the inflation forecast for the United States has been raised from 2.8% to 3.2%. The OECD further warns that by the end of 2025, inflation in the US may approach 4%.
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