Trump Tariffs to Slash US Growth to 1.6%, Global to 2.9%, says OECD

The Organisation for Economic Co-operation and Development (OECD) has significantly cut its economic growth projections for the United States, highlighting escalating trade tensions and inflation risks as major concerns. The revised forecast comes amid rising global uncertainty, with the OECD pointing to protectionist trade policies and policy instability as key threats to economic stability.

OECD Lowers U.S. Growth Forecast Amid Inflation and Tariff Pressures

The OECD expects the U.S. economy to grow by only 1.6% in 2025, a sharp downgrade from its earlier forecast of 2.2% in March. The outlook worsens further in 2026, with growth projected at 1.5%. This slowdown mirrors a broader weakening in global momentum, as global economic growth is predicted to fall from 3.4% in 2024 to 2.9% in 2025.

“Global economic prospects are weakening,” the OECD stated, citing “substantial barriers to trade” and “heightened policy uncertainty.” The organisation also cautioned about rising U.S. consumer prices, forecasting that inflation could approach 4% by the end of 2025. “Higher trade costs, especially in countries raising tariffs, will also push up inflation,” it added.

Consumer Sentiment Declines as Retailers Warn of Tariff Impact

Concerns expressed by the OECD are in line with warnings from Wall Street analysts and Federal Reserve Chair Jerome Powell, who noted the risk of stagflation: a situation where inflation rises while economic growth slows. Prominent retailers, including Nike, Target, Walmart, and Best Buy, have cautioned about potential price increases due to tariffs.

Consumer sentiment has declined for 4 consecutive months, according to a University of Michigan survey, as the effects of tariffs begin to be felt more widely. With consumer spending making up nearly two-thirds of U.S. economic activity, any pullback in spending could hurt businesses, lead to job cuts, and further dampen growth. “Global trade tensions are hitting sentiment,” said the OECD.

Despite elevated tariffs since the start of President Trump’s second term, recent developments have introduced some relief. A trade deal between the US and China last month reduced key tariffs, boosting market confidence. In addition, the administration paused several proposed reciprocal tariffs and eased duties on select imports from Mexico, Canada, and the auto sector. However, the legality of some of the president’s most aggressive tariff measures was recently called into question, adding further uncertainty to the policy landscape.

Read More: US Trade Court Blocks Most of Trump’s Global Tariffs

Conclusion

Although key economic indicators such as low unemployment and steady job growth offer reassurance, the OECD’s forecast signals a more challenging period ahead for the U.S. economy. With inflation set to rise and consumer sentiment under pressure, the long-term effects of trade tensions could weigh heavily on growth.

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