PARIS — June 4, 2025 — The Organisation for Economic Co-operation and Development (OECD) has revised its global economic growth projections downward, forecasting a 2.9% expansion for both 2025 and 2026. This adjustment reflects mounting challenges stemming from heightened trade tensions, increased policy uncertainty, and tighter financial conditions.
The OECD’s latest Economic Outlook underscores the significant impact of recent trade policies, particularly those implemented by the United States. President Donald Trump’s administration has introduced substantial tariffs, raising the average U.S. tariff rate to 15.4%—the highest since 1938. These measures have disrupted global supply chains and prompted retaliatory actions from key trading partners, notably China.
United States: Economic Deceleration Amid Trade Policies
The U.S. economy is projected to experience a marked slowdown, with growth expected to decline from 2.8% in 2024 to 1.6% in 2025 and further to 1.5% in 2026. The OECD attributes this deceleration to the increased trade costs resulting from the new tariffs, which have dampened business investment and consumer spending. Additionally, the Congressional Budget Office (CBO) has indicated that while these tariffs might reduce the federal deficit by $2.8 trillion over the next decade, they could also lead to higher inflation and a smaller overall economy.
Inflation in the U.S. is anticipated to rise to 3.9% by the end of 2025, driven by higher import prices due to the tariffs. This inflationary pressure, coupled with policy uncertainty and a reduction in the federal workforce, poses significant risks to the country’s economic stability.
China and Eurozone: Slowing Growth Amid External Pressures
China’s economic growth is also expected to slow, with forecasts indicating a decline from 5.0% in 2024 to 4.7% in 2025 and 4.3% in 2026. This slowdown reflects both domestic structural challenges and external trade pressures, including the impact of U.S. tariffs. While China’s government has implemented policy stimulus measures to mitigate these effects, the overall outlook remains subdued.
In the Eurozone, growth is projected to be modest, with the OECD forecasting a 1.0% expansion in 2025 and 1.2% in 2026. Trade disruptions and policy uncertainties continue to weigh on economic activity in the region. The Bank of England has highlighted the significant consequences of the fragmented global trade system, emphasizing the need for coordinated policy responses to address these challenges.
Global Implications and the Need for Coordinated Policy Responses
The OECD warns that the proliferation of trade barriers and the resulting fragmentation of global trade could have lasting adverse effects on economic growth. The organization emphasizes the importance of coordinated policy responses and structural reforms to address these challenges and support sustainable economic growth worldwide. Without such measures, the global economy risks entering a period of prolonged stagnation.
The report also notes that the current trade tensions have led to increased volatility in financial markets, with major stock indices experiencing fluctuations in response to policy announcements. Businesses and consumers alike are facing higher costs, reduced purchasing power, and increased uncertainty, all of which contribute to the dampened economic outlook.
In conclusion, the OECD’s revised forecasts highlight the pressing need for international cooperation to address the challenges posed by protectionist policies and policy uncertainty. By working together to reduce trade barriers and implement structural reforms, countries can help restore confidence in the global economy and pave the way for sustainable growth.
