The Organisation for Economic Co-operation and Development (OECD) sharply downgraded its 2025 U.S. economic growth forecast this week, pointing to escalating trade policy shifts and tightening workforce trends as key factors.
According to CNBC, the OECD now expects the U.S. economy to grow by just 1.6% in 2025 and 1.5% in 2026. That marks a significant drop from the organization’s March projection of 2.2% for 2025. The revised outlook reflects trade restrictions, falling immigration levels, and a reduced federal workforce.
The global economic picture is similarly dim. The OECD predicts global GDP growth will fall from 3.3% in 2024 to 2.9% in both 2025 and 2026. “The slowdown is concentrated in the United States, Canada, and Mexico,” the organization noted.
OECD Chief Economist Alvaro Pereira emphasized the weight of uncertainty in driving down forecasts. “The reasons why we downgraded almost everybody in our forecast is that trade uncertainty and economic policy uncertainty has reached unprecedented levels,” Pereira said in a CNBC interview.
Adding to the turbulence, recent legal reversals temporarily halted some retaliatory tariffs before they were reinstated. President Trump also announced a hike in steel tariffs to 50%, fueling further instability in global markets.
Inflation projections were also revised upward. U.S. inflation is now expected to reach 3.2% in 2025, up from the earlier estimate of 2.8%, with the possibility of climbing to 4% by year-end. The average for G20 countries is pegged at 3.6%.
Despite the grim outlook, Pereira highlighted one bright spot for the U.S. economy: technological advancement. “Productivity has been very strong in the United States,” he said, referencing gains linked to AI and other innovations.
He added that conditions could improve with stronger investment and the easing of trade restrictions. “We might be on the cusp of something quite significant,” Pereira noted, pointing to the potential for recovery if policy uncertainty subsides.
