OECD forecasts a sharp economic slowdown and higher inflation in the U.S., citing tariffs
U.S. economic growth is likely to hit the brakes this year, with GDP dramatically slowing due to the impact of the Trump administration's tariffs and uncertainty around its economic policies, the Organization for Economic Cooperation and Development, or OECD, said Tuesday.
GDP growth is forecast to slide to 1.6% in 2025 and 1.5% next year, a sharp reduction from the 2.8% growth recorded last year, according to the OECD, an international organization of 38 member countries that focuses on promoting economic growth.
While the OECD's U.S. forecast didn't mention President Trump by name, the report cited new tariffs as one of the primary causes of the economic slowdown. The Trump administration's policies, which have introduced new import duties on almost every foreign nation, have hiked the effective tariff rate to 15.4% from 2% last year, marking the highest rate since 1938, the group said.
Because tariffs are paid by U.S. importers like Walmart, those costs are largely passed onto consumers in the form of higher costs — prompting the OECD to forecast that inflation in the U.S. will "spike in mid-2025" and reach 3.9% by the end of 2025.
The Consumer Price Index rose by 2.3% in April, as the tariffs largely hadn't yet impacted prices at that point.
Without mentioning Mr. Trump, OECD chief economist Álvaro Pereira wrote in a commentary that accompanied the forecast that "we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment.''
The report added that the U.S. is facing risks "skewed to the downside, including a more substantial slowing of economic activity in the face of policy uncertainty, greater-than-expected upward pressure on prices from tariff increases, and large financial market corrections."
World economic growth is also forecast to slow to 2.9% this year and stay there in 2026, according to the OECD's forecast. That would mark a substantial deceleration from growth of 3.3% global growth last year and 3.4% in 2023.
contributed to this report.
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