OECD cuts growth forecasts amid rising trade tensions

On June 3, 2025, the Organization for Economic Cooperation and Development (OECD) issued a report detailing a significant downgrade in its growth forecasts for both the U.S. economy and the global economy. The report highlighted that the projected growth for the U.S. has been sharply reduced to 1.6%, with global growth now expected to slow to 2.9%. This revision marks a stark contrast to previous expectations of 2.4% growth for the U.S. and 3.3% globally, reflecting the impact of current trade tariffs and an increasingly challenging economic environment. The OECD specifically highlighted that the main contributors to this downward revision include heightened economic policy uncertainty, escalating trade tensions, and an increase in trade barriers. The report emphasized the toll these factors have taken on business and consumer confidence, as well as the risks of inflation rising due to increased trade costs. Economies most adversely affected are those of North America and China, with the OECD predicting a sharp slowdown, particularly in Mexico and Canada. As previously projected, U.S. inflation could rise to around 4% by the end of the year, and growth may further decelerate to 1.5% in 2026. Meanwhile, China's economy is expected to grow at a reduced rate of 4.7% in 2025, compounded by ongoing trade disputes. The report underscores the fragile nature of recent trade agreements, which have faced violations from both U.S. President Donald Trump and Chinese President Xi Jinping, thus exacerbating uncertainty. In light of these unfavorable projections, the OECD urged governments to resolve international trade differences constructively and lift trade barriers quickly to promote investment, stimulate economic growth, and help control inflation. The OECD noted that taking steps to improve trade conditions could significantly alter the current pessimistic outlook, ultimately encouraging confidence in the markets and aiding in economic recovery.