OECD Warns of Slower Global Growth as Trade Tensions Reshape U.S. Economic Outlook

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The Organisation for Economic Co-operation and Development (OECD) has trimmed its global growth forecast for 2025 and 2026, citing U.S. President Donald Trump’s aggressive tariff policies as a major factor slowing economic expansion. The OECD now expects global GDP to grow by 2.9% in 2025 and 2026, down from its previous forecast of 3.1% and 3.0%, respectively.

Impact of Trump’s Tariffs:

The effective tariff rate on U.S. imports has surged from 2% in 2024 to 15.4%, the highest since 1938.
Retaliatory measures from China, the EU, and other trade partners are expected to further weaken global trade flows.

U.S. Economic Slowdown:

The U.S. economy is now projected to grow by just 1.6% in 2025, down from 2.2% in the previous forecast.
Growth is expected to slow further to 1.5% in 2026, reflecting higher import costs and reduced business confidence.

Global Trade & Inflation Concerns:

The OECD warns that protectionist policies are fueling inflation, with U.S. consumer prices expected to rise nearly 4% by year-end.
The Group of 20 economies will see inflation moderate to 3.6% in 2025 and 3.2% in 2026, but the U.S. remains an exception.

Policy Uncertainty & Market Reaction:

The OECD cautions that Trump’s unpredictable trade policies are eroding investor confidence, leading to stock market volatility.
The Federal Reserve may delay interest rate cuts until 2026, given persistent inflationary pressures.

Calls for Trade Negotiations:

The OECD urges global leaders to ease trade tensions, warning that continued fragmentation could further weaken investment and job growth.
The G7 and OECD ministerial meetings are expected to discuss potential trade agreements to mitigate economic risks.

The OECD’s latest forecast underscores the economic risks posed by escalating trade barriers, with Trump’s tariff policies contributing to a weaker global outlook.

Source: Economic Times, MSN, Tuko, CNBC TV18, and Moneycontrol.