OECD warns Trump Tariffs dragging down global economy
A new OECD report warns that Trump’s import tariffs could slash global economic growth to just 2.9% in 2025, with clear impacts on the US, China, Canada, Mexico, and the EU. The organization urges world leaders to urgently restore a cooperative global trade system.
In its latest economic outlook released on June 3, 2025, the Organisation for Economic Co-operation and Development (OECD) issued a stark warning: the global economy is under mounting pressure from the trade policies of President Donald Trump, particularly his recurring imposition of import tariffs.
These policies, the OECD noted, are injecting persistent uncertainty into global markets, potentially dragging down economic growth this year and next—unless major trading nations resume negotiations and reach durable agreements.
The OECD has revised its global growth forecast for 2025 down to 2.9%, compared with 3.3% in 2024 and 3.1% projected as recently as March. The downgrade reflects concerns over volatile US tariff policies, which have repeatedly shifted, imposed, paused, and reimposed, disrupting global supply chains.
As a result, many firms front-loaded imports during Q1 to avoid anticipated July tariffs, leading to a sharp slowdown in economic activity across OECD countries. Growth among member states was a mere 0.1% in Q1 2025, the lowest rate since the Covid-19 crisis.
US Economy Also Feels the Strain
Even the US, the architect of these trade actions, is not immune to their effects. The OECD now expects US GDP growth to slow to 1.6% in 2025, down from its March estimate of 2.2%, and to fall further to 1.5% in 2026—a marked decline from the 2.8% growth recorded in 2024. Contributing factors include elevated tariffs, retaliatory trade measures from partner nations, tighter immigration policies, and federal workforce budget cuts.
If the Trump administration proceeds with an additional 10% tariff hike on major trading partners, the OECD warns that US economic growth could contract by 1.6 percentage points over two years. Global growth, in turn, could shrink by nearly 1% during the same period, with countries heavily dependent on US trade, such as Canada, Mexico, and China, likely to bear the brunt of the impact.
Eurozone and China Outlooks Remain Subdued
Elsewhere, the OECD forecasts Eurozone growth at just 1% in 2025, with a slight uptick to 1.2% in 2026—in line with previous estimates. Meanwhile, China’s economy, although expanding faster than most developed nations, is projected to decelerate to 4.7% in 2025 and 4.3% in 2026, a modest downgrade from earlier projections.
Structural Pressures Mount in 2025 OECD Secretary-General Mathias Cormann emphasised that despite showing “resilience” in late 2024, the global economy is now entering a more fragile phase. He cited mounting geopolitical tensions, unresolved trade disputes, and increased fiscal pressures on governments, stemming from higher military spending and green investment mandates to combat climate change.
OECD’s Call: Cooperate or Risk Long-Term Recession
The report concludes with a clear recommendation to policymakers:
“The single most important priority is constructive global cooperation to resolve trade tensions.”
Without coordinated action, the OECD warns, the global economy may not just slow—it could tip into a prolonged recession.
