President Donald Trump’s tariffs have caused a downward trend for the U.S. economic growth. Economic growth forecasts for the U.S. and globally were reportedly cut further by the Organisation for Economic Co-operation and Development (OECD) as President Trump’s tariff turmoil weighs on expectations.
“Global GDP growth is projected to slow from 3.3% in 2024 to 2.9% this year and in 2026 … on the technical assumption that tariff rates as of mid-May are sustained despite ongoing legal challenges,” the OECD said.
The U.S. growth outlook was downwardly revised to just 1.6% this year and 1.5% in 2026. In March, the OECD was still expecting a 2.2% expansion in 2025.
READ: The perils of Trump’s proposed tariff trade war (February 6, 2025)
“The global outlook is becoming increasingly challenging,” the report said. “Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist.”
“The reasons why we downgraded almost everybody in our forecast is that trade uncertainty and economic policy uncertainty has reached unprecedented levels,” OECD Chief Economist Alvaro Pereira told CNBC’s “Squawk Box Europe” on Tuesday.
The OECD noted that consumption and investment have declined, along with key activity indicators. As a result, its models project slower growth, fewer jobs, and rising inflationary pressures.
The Organisation for Economic Co-operation and Development (OECD) is an international body that promotes policies to improve global economic and social well-being. Founded in 1961 and headquartered in Paris, it has 38 member countries, including the U.S., Canada, Japan, and most EU nations.
The OECD conducts economic research, collects data, and provides policy recommendations on issues like trade, taxation, education, employment, and the environment. Its goal is to support sustainable growth, financial stability, and improved living standards. It also collaborates with non-member countries to address global challenges, making it a key player in shaping international economic policy and governance.
A downward trend in U.S. economic growth related to Trump’s tariffs means the economy is slowing down with less expansion in key areas like production, jobs, and consumer spending. Tariffs increase the cost of imported goods, making materials and products more expensive for businesses and consumers. This can lead to higher prices (inflation), reduced demand, and lower profits for companies.
Trade partners often retaliate with their own tariffs, further hurting U.S. exports. Together, these factors can reduce investment and slow down overall economic activity, potentially leading to slower GDP growth, job losses, and increased uncertainty in markets. In short, tariffs intended to protect domestic industries may end up weighing on the broader economy.
For Trump, a sustained downward trend in economic growth tied to his tariff policies could damage his political standing by fueling criticism that his approach harms the economy. It might also weaken his leverage in future trade negotiations, as prolonged economic slowdown could limit his ability to push aggressive trade measures without facing domestic backlash.