The OECD warns that the global economy will slow this year, largely due to unpredictable U.S. trade policy. Global growth is forecast at 2.9% for both 2025 and 2026, a downgrade from previous estimates and down from 3.3% in 2024.
The organization cited rising tariffs and policy uncertainty—especially from the U.S.—as key threats. President Trump’s shifting approach to trade, with new tariffs and ongoing legal disputes, has increased global instability.
The U.S. economy is expected to slow to 1.6% growth, down from 3.3% last year, due to trade disruptions, lower immigration, and government downsizing. The first quarter contraction reflected companies rushing to import goods ahead of new tariffs.
Mexico and Canada will also see weaker growth, at 0.4% and 1.0% respectively, as trade ties with the U.S. come under pressure. The OECD said that most global economies are affected by the uncertainty.
Chief economist Alvaro Pereira emphasized that reducing trade barriers could help restore stronger growth and lower inflation. A global 1.5-point cut in tariffs could make a significant difference.
The OECD also called for policies to stimulate housing, business, and public investment, warning that current uncertainty could lead to a drop similar to past crises. At the same time, Pereira cautioned that increased public spending, such as on defense, must be carefully managed to avoid driving inflation or debt.
Inflation is easing globally, but service prices remain high. European countries may still lower interest rates, but the U.S. Fed is more constrained, with inflation expected to hit 4%, limiting the chance of rate cuts this year.