Global economic growth is expected to slow down to 2.9%, the OECD said on Tuesday, slashing its earlier forecast and warning that U.S. President Donald Trump's tariffs blitz will stifle the world economy, hitting the United States especially hard.
After 3.3% growth last year, the world economy is expected to expand by a "modest" 2.9% in 2025 and 2026, according to the Paris-based Organisation for Economic Co-operation and Development (OECD).
In its previous report in March, the OECD forecasted growth to be 3.1% for 2025 and 3.0% for 2026.
Since then, Trump has launched a wave of tariffs rattling financial markets.
"The global outlook is becoming increasingly challenging," said the OECD, an economic policy group of 38 mostly wealthy countries.
It said "substantial increases" in trade barriers, tighter financial conditions, weaker business and consumer confidence and heightened policy uncertainty will all have "marked adverse effects on growth" if they persist.
The OECD downgraded its 2025 growth forecast for the U.S. from 2.2% to 1.6%.
The world's biggest economy is expected to slow further next year to 1.5%.
Trump, who has insisted that the tariffs would spark a manufacturing revival and restore a U.S. economic "Golden Age," posted on his Truth Social platform before the OECD report's publication: "Because of Tariffs, our Economy is BOOMING!"
The OECD holds a ministerial meeting in Paris on Tuesday and Wednesday, with U.S. and EU trade negotiators expected to hold talks on the sidelines of the gathering after Trump threatened to hit the EU with 50% tariffs.
The Group of Seven advanced economies is also holding a meeting focused on trade.
"For everyone, including the U.S., the best option is that countries sit down and get an agreement," OECD chief economist Alvaro Pereira said in an interview with Agence France-Presse (AFP).
"Avoiding further trade fragmentation is absolutely key in the next few months and years," Pereira said.
Trump imposed a baseline tariff of 10% on imports from around the world in April.
He unveiled higher tariffs on dozens of countries but has paused them until July to allow time for negotiations.
The U.S. president has also imposed 25% tariffs on cars and plans to raise those on steel and aluminum to 50% as of Wednesday.
In the OECD report, Pereira warned that "weakened economic prospects will be felt around the world, with almost no exception."
He added, "Lower growth and less trade will hit incomes and slow job growth."
The outlook "has deteriorated" in the U.S. after the economy expanded by a robust 2.8% last year, the report said.
The effective tariff rate on U.S. merchandise imports has gone from 2% in 2024 to 15.4%, the highest since 1938, the OECD said.
The higher rate and policy uncertainty "will dent household consumption and business investment growth," the report said.
The OECD also blamed "high economic policy uncertainty, a significant slowdown in net immigration and a sizeable reduction in the federal workforce."
While annual inflation is expected to "moderate" among the Group of 20 economies to 3.6% in 2025 and 3.2% in 2026, the U.S. is "an important exception."
U.S. inflation is expected to accelerate to just under 4% by the end of the year, two times higher than the target for consumer price increases set by the Federal Reserve (Fed).
The OECD also slightly reduced its growth forecast for China – which was hit with triple-digit tariffs that have been temporarily lowered – from 4.8% to 4.7% this year.
Another country with a sizeable downgrade is Japan: The OECD cut the country's growth forecast from 1.1% to 0.7%.
However, the outlook for the eurozone economy remains intact at 1%.
Türkiye's economy, on the other hand, is estimated to expand by 2.9% in 2025 and 3.3% in 2026, which is also down from the previous estimate of 3.1% for this year and 3.9% for 2026.
"There is the risk that protectionism and trade policy uncertainty will increase even further and that additional trade barriers might be introduced," Pereira wrote.
"According to our simulations, additional tariffs would further reduce global growth prospects and fuel inflation, dampening global growth even more," he said.
