The global growth forecast for the year has been considerably cut down by the Organisation for Economic Co-operation and Development (OECD), as the body issued a stark warning about the impact of the current trade policies undertaken by the United States. A heavy downturn, attributed to President Donald Trump’s aggressive tariff policies, is predicted to affect not just the global economy but the U.S. in particular. The world economy, after achieving an expansion of 3.3 percent last year, is now projected to only manage a ‘modest’ growth of 2.9 percent during 2025 and 2026 according to OECD’s recent publication.
This Paris-centric institution had previously estimated a more optimistic growth figure of 3.1 percent for 2025 and 3.0 percent for 2026 in its March report. However, the wake of an onslaught of tariffs brought into action by Trump has led to significant turbulence in the financial markets. That is part of the reason why this downgraded projection has come into the picture.
The OECD, essentially a consortium of 38 largely affluent nations championing economic policies, commented that the global economic landscape appears increasingly challenging. The introduction of ‘significant increase’ in trade barriers, coupled with tighter financial conditions, dwindling business and consumer confidence, and escalating policy uncertainty, they warn, could all contribute to ‘markedly negative effects on growth’ should they continue.
The implication of these factors has warranted the OECD to revise its growth forecast for the United States. Specifically, they adjusted their projection for the 2025 US growth downwards, from an initial 2.2 percent to a new figure of 1.6 percent. After being the world’s leading economy, the U.S. faces a further slowdown next year to an estimated growth rate of 1.5 percent.
Undeterred by these predictions, Trump has maintained his conviction that his tariffs would induce a resurgence in the manufacturing sector, and reinstate a ‘Golden Age’ for the American economy. These developments are set to be discussed in the OECD’s ministerial meeting scheduled to take place in Paris in the following days.
In the margin of these meetings, trade negotiators from the U.S. and EU are expected to conduct discussions. These talks are of heightened importance as they follow Trump’s recent threat to impose 50-percent tariffs on the European Union. The Group of Seven most advanced economies is also organizing a discussion focused primarily on the trade situation.
While concerns loom, the OECD chief economist emphasizes that the ideal way forward for everyone, including the U.S., is for nations to engage in dialogue and strive towards a mutually beneficial agreement. The avoidance of added trade fragmentation is enumerated to be of utmost significance in the forthcoming months and years.
Meanwhile, Trump implemented a baseline tariff of 10 percent on imports from across the globe as early as April. He subsequently announced increased tariffs on several countries but decided to put them on hold until July to allow for negotiations. In addition to that, the U.S. president has also introduced a 25-percent tariff on automobiles.
However, his protectionist policies do not end there. There are further plans in the works to escalate tariffs for steel and aluminium products to an overwhelming 50 percent, set to come into effect this Wednesday. Such measures, while aimed towards promoting domestic production, may lead to severe disruptions in international trade and could potentially backfire at the U.S. economy.
The post OECD Cuts Global Growth Forecast Amid U.S. Trade Policies appeared first on Real News Now.
About Author
