Economic growth forecasts for the U.S. and globally were cut further by the Organisation for Economic Co-operation and Development as President Donald Trump’s tariff turmoil weighs on expectations.
The U.S. growth outlook was downwardly revised to just 1.6% this year and 1.5% in 2026.
The fallout from Trump’s tariff policy, elevated economic policy uncertainty, a slowdown of net immigration and a smaller federal workforce were cited as reasons for the latest downgrade.
It had previously forecast global growth of 3.1% this year and 3% in 2026.
U.S. inflation could even be closing in on 4% toward the end of 2025, the OECD said.
Economic growth projections for the U.S. A. and the Organization for Economic Co-operation and Development cut them further worldwide as expectations are weighed by President Donald Trump’s tariff turmoil.
The U. S. Only 1 point 6 percent growth was predicted for this year, and 1 point 5 percent was predicted for 2026. The OECD continued to project a 2–2% growth rate in 2025 in March.
The latest downgrade was attributed to a number of factors, including a slower rate of net immigration, a smaller federal workforce, increased economic policy uncertainty, and the fallout from Trump’s tariff policy.
The OECD has stated that “the slowdown is concentrated in the United States, Canada, and Mexico,” while other economies are anticipated to see smaller downward revisions. Global growth is also anticipated to be lower than previously predicted.
According to projections, global GDP growth will slow from 3 percent in 2024 to 2 percent this year and in 2026. on the technical presumption that, in spite of continuing legal challenges, tariff rates as of mid-May are maintained,” the OECD stated.
Previously, it predicted that global growth would be 3.1 percent this year and 3.2 percent in 2026.
“The global outlook is becoming increasingly challenging,” the report stated. “If they continue, significant trade barriers, tighter financial conditions, declining consumer and business confidence, and increased policy uncertainty will all have a negative impact on growth prospects. “,”.
In recent weeks, there have been frequent changes to tariffs, which has caused uncertainty in economies and markets around the world. A few of the latest events include the U.S. overturning Trump’s reciprocal, nation-specific levies. S. . subsequently reinstated by an appeals court, and Trump’s declaration that he would double steel duties to 50%.
“Trade and economic policy uncertainty have reached unprecedented levels, which is why we downgraded almost everyone in our forecast,” OECD Chief Economist Alvaro Pereira said on Tuesday on CNBC’s “Squawk Box Europe.”.
“We’ve been witnessing a decline in investment and consumption as a result, and activity indicators have actually decreased as well. Furthermore, if you consider this and make an effort to estimate it in our models, you will see that future inflationary pressures, job losses, and growth will all be reduced. “..”.
Although their effects will be partially mitigated by declining commodity prices, the OECD revised its inflation forecast, stating that “higher trade costs, especially in countries raising tariffs, will also push up inflation.”. “..”.
The effect of tariffs on inflation has been a topic of intense discussion. Many central bank policymakers and international analysts have argued that it is still unclear how the levies will affect prices and that a lot depends on things like possible countermeasures.
There is a significant difference between the U.S. and the OECD’s inflation outlook. A. as well as a few other significant economies worldwide. For example, the March estimate of 3 to 8 percent inflation in 2025 has been lowered to 3 to 6 percent for G20 countries, but the forecast for the U. S. . has increased to 3point 2 percent from 2point 8 percent.
U. A. According to the OECD, inflation may even be approaching 4 percent by the end of 2025.
Pereira from the OECD also talked about how technological advancements like artificial intelligence are affecting productivity and providing the U.S. S. . a benefit.
Because of the exposure to AI by U.S. sectors, productivity in the U.S. has been very strong, and we anticipate that this will likely widen the gap between the U.S. and the rest of the world. A. “are greater,” he stated.
He stated that there is a chance for a “significant productivity revival” with technologies like artificial intelligence, robotics, and quantum computing, but only if trade barriers are removed and investment and consumption rise.
“I think we might be on the cusp of something quite significant if we are able to get trade agreements between countries, not only between China and the United States but also other parts of the world and if we are able to reduce uncertainty,” Pereira stated.
