OECD cuts growth forecasts on Trump trade war
By Abigail Townsend
Date: Tuesday 03 Jun 2025
(Sharecast News) - Global growth is set to slow this year and next, the Organisation for Economic Co-operation and Development warned on Tuesday, on the back of Donald Trump's sweeping tariff regime.
Publishing its latest economic outlook, the Paris-based body cut its growth forecasts for the global economy to 2.9% this year and the next. It had previously forecast growth of 3.1% and 3% respectively.
It warned that the slowdown would likely hit the US, Canada, Mexico and China hardest.
Growth in the US was projected to tumble from 2.8% in 2024 to just 1.6% this year and 1.5% in 2026. The OECD had previously forecast growth of 2.2% in the US for 2025.
The UK's projections were also trimmed, from 1.4% to 1.3% this year, and to just 1.0% in 2026.
The OECD said: "Global economic prospects are weakening, with substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertain projected to have adverse impacts on growth."
Inflationary pressures were resurfacing in some economies, it added, with higher tariff-related costs likely to weigh heavily.
It still expects global inflation to ease, to 3.6% from 3.8%. But in the US, inflation is now expected to reach 3.2% this year, compared to a previous outlook for 2.8%.
The US president announced his stringent tariff regime on 2 April, upending markets and prompting a number of trading partners - including China and the European Union - to impose their own reciprocal levies.
Since then, a temporary ceasefire has been struck between China and the US, while a number of other country-specific taxes have been scaled back.
But the baseline 10% remains in place, as do duties on specific sectors.
OECD secretary general Mathias Cormann said: "Governments need to engage with each other to address any issues in the global trading system positively and constructively through dialogue, keeping markets open and preserving the economic benefits of rules-based trade."
The report will likely make for tough reading for chancellor Rachel Reeves, who is due to publish the government's spending review next month.
The OECD forecast that while inflationary pressures would initially "linger" in the UK, due to higher import prices and robust wage growth, they would likely subside next year.
But it continued: "Substantial debt interest payments will continue to weight on the fiscal balance and push up public debt.
"Fiscal prudence is required as the monetary stance is easing gradually."
The Bank of England cut interest rates in May. But the vote was split, with five backing a 25 basis point cut, two arguing for a larger 50 bps cut and another two wanting to leave rates on hold.
The BoE is juggling strong earnings growth and a spike in inflation with tepid economic growth and the wider impact of Trump's tariffs.
Kathleen Brooks, research director at XTB, said: "As economic data trickles in, a picture is starting to emerge of the new economic order. Trump's tariffs have delivered an economic shock, and the damage could take some time to reverse."
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN