Trade war prompts OECD to slash U.S. and global economic forecasts

Investing.com -- The OECD has lowered its global and U.S. economic growth forecasts, citing "higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty" as key risks to investment and consumer spending.

Global GDP growth is now projected to slow from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, the OECD said in its latest economic outlook. The new 2025 forecast is down from the 3.3% previously predicted.

The U.S. economy, which had been expanding at a strong pace, is expected to decelerate from 2.8% growth in 2024 to 2.2% in 2025 and 1.6% in 2026. The 2025 forecast is lower than the 2.4% predicted in December.

The organization attributed the downward revisions to rising tariffs and "a substantial increase in newspaper-based measures of economic policy uncertainty."

The OECD's projections assume that "bilateral tariffs between Canada and the United States and between Mexico and the United States are raised by an additional 25 percentage points on almost all merchandise imports from April." 

“Significant changes have occurred in trade policies that if sustained would hit global growth and raise inflation,” stated the firm.

Inflation remains a concern, with the OECD noting that "services inflation is still elevated, with labour markets tight, and goods inflation is picking up from very low levels." 

In the G20 economies, headline inflation is expected to fall from 3.8% in 2025 to 3.2% in 2026, though core inflation in many countries—including the U.S.—is projected to remain above central bank targets.

The OECD urged policymakers to "find ways of addressing their concerns together within the global trading system." 

They also warned that "higher and broader increases in trade barriers would hit growth around the world and add to inflation."