Slashed Global Growth Outlook for 2025 by OECD to 2.9%, due to Tariff Disputes
Revised Output
Donald Trump's tariff blitz is causing a stir in the global economic landscape, with the Organization for Economic Co-operation and Development (OECD) slashing its growth forecast. This trade war will apparently burden the world economy, hitting the US exceptionally hard.
Last year, the world economy saw 3.3% growth, but now, according to the OECD, it's expected to expand by a mere 2.9% in 2025 and 2026. This projection marks a significant drop from the 3.1% figure that the economic policy group predicted in March this year.
The past few months have seen a wave of tariffs launched by Trump that's sent tremors through financial markets. The OECD warns that this volatile atmosphere could lead to disastrous consequences for the global economy.
"The global outlook is becoming increasingly challenging," said the OECD, an economic policy group consisting of 38 mostly wealthy countries.
These challenging times present substantial increases in trade barriers, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty. If these circumstances persist, they will most certainly have "marked adverse effects on growth", as the OECD rightly points out.
High-level meetings are taking place as the Group of Seven advanced economies gather for a meeting focused on trade, and the OECD holds a ministerial meeting in Paris. Trade negotiators from the US and EU are expected to hold talks on the sidelines, following Trump's threat of imposing 50% tariffs on the European Union.
The best possible scenario, according to OECD chief economist Alvaro Pereira, is for governments to engage in dialogue to address issues in the global trading system constructively. His advice emphasizes the importance of preserving the economic benefits of open markets and rules-based trade for a harmonious global economy.
Trump's tariffs are expected to exact a significant toll on the US economy. This year, the US is predicted to grow just 1.6%, down from 2.2% in the previous outlook, and will slow further to 1.5% in 2026, according to the OECD report. This stark decline is attributed to the "substantial increase in the effective tariff rate on imports" and retaliation from trading partners.
The US effective tariff rate on merchandise imports has skyrocketed to 15.4%, a figure higher than that of the 1930s. The OECD also names high economic policy uncertainty, a significant slowdown in net immigration, and a sizeable reduction in the federal workforce as contributing factors.
Inflation is expected to accelerate in the US, hitting 4% by the end of the year, double the target set by the Federal Reserve for consumer price increases.
Industry experts see a potential escalation of protectionism and trade policy uncertainty, which may lead to additional trade barriers and further fuel inflation—dampening the economic growth even more.
The trade war instigated by Donald Trump's tariff blitz is causing heightened uncertainty within the global economic landscape, specifically in the domains of business, finance, politics, and general-news as the fallout affects international trade relations. The Organization for Economic Cooperation and Development (OECD) foresees that this unstable climate could incur adverse effects on the global economy, with potential moments of negotiation, such as the Group of Seven advanced economies' meeting, offering an opportunity for constructive dialogue to address issues in the global trading system and preserve the benefits of open markets.
Industry experts anticipate that increased trade barriers and ongoing protectionism, as a result of tariffs, could escalate and further fuel inflation, leading to dampened economic growth across multiple sectors, including finance, business, politics, and general-news.
