OECD cuts global growth forecast amid escalating trade war

Logo of Organisation for Economic Co-operation and Development (OECD)

The Organisation for Economic Co-operation and Development (OECD) lowered its global economic growth forecast, citing the impact of a widening trade war driven by US President Donald Trump's tariff policies.

The OECD now predicts the world economy will grow by 2.9% in both 2025 and 2026. This is down from its earlier forecasts in March, which projected 3.1% growth in 2025 and 3.0% in 2026.

"The global outlook is becoming increasingly challenging," the OECD stated, highlighting that "substantial increases" in trade barriers, tighter financial conditions, reduced business and consumer confidence, and greater policy uncertainty could have "marked adverse effects on growth" if they continue.

The OECD revised its 2025 growth projection for the US from 2.2% down to 1.6%, with further deceleration expected in 2026 to 1.5%. It reflects the significant increase in the effective rate of tariffs on imports and retaliatory measures from some trading partners.

China’s growth forecast has also been trimmed slightly, from 4.8% to 4.7% in 2025. China has been affected by triple-digit US tariffs, which have been temporarily eased.

The organization also revised its inflation forecast, stating that higher trade costs—particularly in countries that raise tariffs—will push inflation higher, although their impact will be partially offset by lower commodity prices.

Noting that inflation in the US could approach 4% by the end of 2025, nearly twice the Federal Reserve's target.