The Organisation for Economic Co-operation and Development cut its U.S. and global economic growth forecasts on Tuesday, citing rising tariffs, persistent policy uncertainty, and weaker consumer and business confidence as key drags on the global outlook. The revised estimates reflect growing concern that escalating trade restrictions-primarily driven by President Donald Trump's tariff policy-are taking a heavier toll than previously anticipated.
U.S. gross domestic product is now projected to grow just 1.6% in 2025, down from the OECD's 2.2% forecast in March. For 2026, growth was trimmed to 1.5%. The group also lowered its global GDP growth outlook to 2.9% for both 2025 and 2026, from earlier estimates of 3.1% and 3%, respectively.
"The global outlook is becoming increasingly challenging," the OECD report stated. "Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist."
The latest downgrade follows months of market instability fueled by a flurry of tariff developments. Among them: Trump's reciprocal, country-specific tariffs were initially struck down by the U.S. Court of International Trade but later reinstated by an appeals court. Trump also vowed to double duties on steel imports to 50%.
"The reasons why we downgraded almost everybody in our forecast is that trade uncertainty and economic policy uncertainty has reached unprecedented levels," said OECD Chief Economist Alvaro Pereira on CNBC. "As a consequence, we've been seeing that consumption and investment has come down."
Inflation forecasts have also been revised. The OECD now expects U.S. inflation to hit 3.2% in 2025, up from a previous estimate of 2.8%. The broader G20 inflation estimate was slightly lowered to 3.6%. Pereira warned U.S. inflation could edge toward 4% by late 2025, driven in part by increased trade costs.
"Higher trade costs, especially in countries raising tariffs, will also push up inflation, although their impact will be offset partially by weaker commodity prices," the OECD said.
The report also noted a divergence between the U.S. and other major economies due to technology. "Productivity has been very strong in the United States, and we expect that likely this will widen the gap," Pereira said, highlighting the U.S.'s higher exposure to artificial intelligence, robotics, and quantum computing.
