The Organisation for Economic Co-operation and Development (OECD) has lowered its global growth outlook for 2025 and 2026. The decision comes as trade tensions, especially from the Trump administration’s policies, continue to hurt the U.S. economy and slow down worldwide growth.
According to the OECD, the world economy is expected to grow by 2.9 percent in both 2025 and 2026. This is less than earlier estimates in March, which had predicted growth of 3.1 percent in 2025 and 3.0 percent in 2026. The global economy had grown by 3.3 percent last year.
The OECD warned that growth may slow even more if more trade barriers are added. New tariffs can lead to higher prices, cause supply chain problems, and increase stress in global financial markets. These effects could hurt both large and small economies.
The U.S. is expected to feel much of the impact. The OECD now forecasts U.S. growth at just 1.6 percent in 2025 and 1.5 percent in 2026. These are major drops from the earlier forecast of 2.2 percent and 1.6 percent for the same years.
New tariffs may encourage companies to manufacture more in the United States, but they also make imported goods more expensive. This means consumers will have less money to spend. Businesses may also slow down investments because they are unsure about future rules and market conditions.
The extra money the U.S. government collects from tariffs will not be enough to make up for the income lost from tax cuts and slower economic growth. The OECD says that due to the 2017 tax law and weak growth, the U.S. budget deficit could rise to 8 percent of its total economy by 2026. This would be one of the largest deficits among developed countries not involved in a war.
The report also notes that inflation will likely stay high. Because of this, the U.S. central bank is expected to keep interest rates unchanged this year and may reduce them slightly by 2026. The target rate could fall to between 3.25 percent and 3.5 percent.
In China, the effects of U.S. tariffs are being softened by government support. Programs to help consumers buy new electronics and appliances, along with more welfare spending, are helping to keep the economy steady. The OECD expects China’s economy to grow 4.7 percent in 2025 and 4.3 percent in 2026. These numbers are only slightly lower than earlier estimates.
The eurozone is showing more stability. The OECD’s forecast for the region remains unchanged, with growth of 1.0 percent in 2025 and 1.2 percent in 2026. Strong job markets, interest rate cuts, and public spending in countries like Germany are helping the economy stay on track.
Overall, the OECD’s latest report shows how much trade policy can affect the global economy. When large countries raise tariffs and change trade rules, it creates uncertainty that slows down growth. The report suggests that better international cooperation and clearer policies are needed to keep the global economy moving forward.
