OECD: US Growth Projected to Drop to 1.6% Hobbled by Trump Trade Wars/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The OECD forecasts U.S. economic growth will drop to 1.6% in 2025. Trump’s global tariff policies are increasing trade uncertainty and costs. Global growth is also expected to decelerate to 2.9% through 2026.
Trump Tariffs and U.S. Slowdown: Quick Looks
- U.S. Growth Cut to 1.6%: The OECD sharply reduced its U.S. growth projection from 2.8% in 2024 to 1.6% this year.
- Tariff Rates Soar: Average U.S. tariffs have risen to 15.4%, the highest level since 1938.
- Global Growth Slows: OECD projects global economic growth to remain flat at 2.9% in both 2025 and 2026.
- Trade Uncertainty Paralyzes Investment: Business and consumer confidence are declining amid policy volatility.
- Court Battle Over Tariffs: A federal court blocked most of Trump’s tariffs; appeals are underway.
- China Faces Growth Decline: Growth in China expected to fall to 4.3% by 2026, hurt by tariffs and real estate collapse.
- Eurozone Shows Modest Recovery: Economic growth in euro countries forecast to rise slowly from 0.8% to 1.2%.
- OECD Warns of Ongoing Risk: Unpredictable trade policies could further undermine global stability.
OECD: US Growth Projected to Drop to 1.6% Hobbled by Trump Trade Wars
Deep Look
OECD: U.S. Growth Projected to Drop to 1.6% as Trump Trade War Hits Home
U.S. economic momentum is slowing sharply under the weight of President Donald Trump’s aggressive trade policies, according to a new forecast from the Organization for Economic Cooperation and Development (OECD). The group predicts U.S. GDP growth will fall to 1.6% in 2025, down from 2.8% the previous year, and edge even lower to 1.5% by 2026.
The OECD attributed the deceleration primarily to Trump’s sweeping tariffs and the uncertainty generated by trade conflicts, which have raised prices, disrupted supply chains, and discouraged business investment.
Tariffs Surge to 15.4% — Highest Since Great Depression
According to the OECD’s report, U.S. average tariff rates now stand at 15.4%, a sharp increase from just 2.5% when Trump returned to the White House. That figure marks the highest effective U.S. tariff rate since 1938, during the Great Depression.
The Trump administration has slapped 10% across-the-board import taxes on most global trade partners, with even higher tariffs on steel, aluminum, and automobiles. The president has also threatened to double some of those duties to 50%, intensifying global concern over the potential for retaliatory measures.
“We have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty,” said OECD chief economist Álvaro Pereira.
Global Outlook Weakens Alongside U.S.
The OECD forecasts global economic growth will slow to 2.9% in 2025, remaining at that level through 2026 — a marked drop from 3.3% in 2024 and 3.4% in 2023.
Though the world economy has shown resilience amid the COVID-19 pandemic and the Russia-Ukraine war, the new wave of protectionism is clouding future prospects. Trump’s return to power and his escalating tariff agenda are now seen as key destabilizing forces.
“This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment,” Pereira warned.
Legal Pushback on Trump’s Tariffs
Adding further unpredictability, a New York federal court blocked key portions of Trump’s tariff policies last week, ruling he had exceeded his legal authority. However, an appeals court later permitted temporary enforcement of the tariffs pending further legal review, allowing the administration to continue collecting duties.
China Faces Slowdown Despite Government Stimulus
China, the world’s second-largest economy, is also bracing for the effects of U.S. tariffs. The OECD forecasts a decline in Chinese growth to 4.7% in 2025 and 4.3% in 2026, down from 5% in 2024.
The slowdown comes amid a slumping real estate market and declining exports. However, Beijing is attempting to counter the drag with rate cuts, expanded credit, and stimulus plans targeting sectors such as manufacturing and elder care.
Eurozone Sees Mild Recovery
In contrast to the U.S. and China, the 20-nation euro area is expected to gradually rebound. Growth is forecast to rise from 0.8% in 2024 to 1.0% in 2025 and 1.2% in 2026. Contributing factors include interest rate cuts by the European Central Bank and public investment, particularly from Germany.
What Lies Ahead
As trade wars intensify, the OECD emphasizes that international cooperation is urgently needed. The organization warns that continued escalation of protectionist policies could further slow global growth, increase inflation, and disrupt financial markets.
With Trump’s policies driving uncertainty and legal challenges unresolved, the trajectory of the U.S. economy — and its influence on global markets — remains deeply uncertain.
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