It's official: Trump's tariffs are damaging the economy
In its latest Economic Outlook, released on Tuesday, the Paris-based Organization for Economic Co-operation and Development cut its forecast for US economic growth in 2025, pointing to the fallout from the administration's trade policies. The 2.8% rate it predicted in March has now been reduced to 1.6%.
The OECD warned that these tariffs, which have pushed the effective US import rate to 15.4% — the highest since 1938 — were not only affecting US growth but reverberating across the global economy too.
Global growth was now projected to slow to 2.9% in both 2025 and 2026, down from 3.3% in 2024.
The OECD said the slowdown in growth was concentrated in the US, Canada, Mexico, and China. Growth in China, the world's second-largest economy, was expected to fall to 4.7% in 2025, down from 5% last year, and come in at 4.3% in 2026.
As of May 27, a blanket 10% tariff applies to all goods imported into the US, with some limited exemptions.
Stoking inflation
A 50% tariff on imports from the European Union were paused until July 7 amid " fast-tracked" negotiations, while steep levies on imports from China have also been put on hold.
The OECD said these policies were eroding investment, disrupting supply chains, and stoking inflation — especially in the US, where price growth is now projected to approach 4% by the end of the year.
OECD secretary-general Mathias Cormann said governments needed to work to keep markets open and preserve the "economic benefits of rules-based global trade for competition, innovation, productivity, efficiency and ultimately growth."
Chief economist lvaro Pereira added: "Lower growth and less trade will hit incomes and slow job growth."
The organization urged governments to de-escalate tensions and roll back tariffs to avoid further damage to the global economy.
In a Monday note, Deutsche Bank economists said there were global signs of a "turbulent but sustained path toward trade de-escalation. The fallout from the US 'Liberation Day' policies — from falling approval ratings to a sell-off in US government bonds — forced a rethink in Washington. While recent court rulings could pave the way for an even more benign trade regime, they also prolong uncertainty."
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