Global GDP growth forecast lowered to 2.9% by OECD as U.S. tariffs and policy shifts weigh on business investment and hiring across regions
The OECD now forecasts lower economic growth, attributing this to the rising risk of global trade wars and differing policies by the U.S. According to its most recent quarterly report, the OECD anticipates global GDP to rise by 2.9% in 2025 and 2026. It means the agency recognizes that recent economic conditions are weaker than initially expected.
The OECD advised that increased trade restrictions and a lack of policy certainty are significant risks to continued economic growth. It pushed governments to pay special attention to trade cooperation and prevent any interruptions in international trade. The IMF noted that slower international trade will result in a decline in both incomes and employment.
According to the OECD, US trade policies have increased global instability, making it more challenging. Rising tariffs and unpredictability are leading many businesses to delay spending or hiring, which in turn weakens economic growth.
United States Faces One of the Sharpest Growth Declines
The OECD reported that the United States is facing one of the sharpest upcoming slowdowns among large economies. The agency changed its projection for 2025 to a growth rate of 1.6%. It has fallen from last year and gives a positive surprise by being below the original forecast. Their theory was that several factors contributed to the decrease, including higher tariffs, growing policy uncertainty, and changes in federal employment, as well as immigration, which is decreasing, and shifts in how people feel about spending, harming U.S. growth.
The OECD states that these aspects collectively prevent the labor market from expanding and reduce overall domestic demand. The effects of these matters impact every person and lead to problems for businesses, as well as the emergence of new challenges. Lower economic growth took place because fewer jobs were created and government spending declined.
Canadian and Mexican Economies Also Hit by Regional Trends
The OECD projects that the economic expansion in Canada and Mexico will be slower in 2025. The Canadian economy is expected to expand slightly, by 1%, while Mexico’s is expected to increase by just 0.4%. They demonstrate how U.S. trade actions impact other economies and the extent to which economies in the region rely on one another.
The slowdown in exports and investment is affecting the leading industries in both places. OECD experts believe that tough and strict rules for trading and the economy could give the area a better chance. Working together globally to facilitate trade and manage market uncertainty can aid the world’s recovery.
