OECD warns of slower global growth amid trade tensions

The OECD has lowered its global growth forecast for 2025 to 3.1% from 3.3%, citing rising trade barriers, geopolitical uncertainty, and inflation. The US and eurozone are expected to see slower growth, while China remains stable. US protectionist policies and new tariffs on Canada, Mexico, and China are contributing to economic turbulence

The Organisation for Economic Co-operation and Development (OECD) has revised its global growth forecast for 2025 downward, citing trade tensions and geopolitical uncertainties. “We are navigating troubled waters,” said OECD Chief Economist Alvaro Santos Pereira, highlighting inflationary pressures and economic challenges ahead.

Despite global GDP growth remaining “resilient” at 3.2% in 2024, the OECD now expects a slowdown to 3.1% in 2025, down from its earlier projection of 3.3%. This revision is due to “higher trade barriers in several G20 economies and increased geopolitical and policy uncertainty weighing on investment and household spending.” The OECD attributes part of this turbulence to US President Donald Trump‘s trade policies, which have fueled protectionism, trade wars, and inflationary pressures.

The slowdown is particularly evident in the United States and the eurozone. The US economy is now projected to grow at 2.2% in 2025, down from the previous 2.4% estimate, before declining further to 1.6% in 2026. Meanwhile, eurozone growth is expected to reach 1.0% in 2025, lower than the earlier 1.3%  forecast, though it will rise to 1.2% in 2026. China, however, is set to maintain steady growth at 4.8% in 2025 and 4.4% in 2026.

The OECD warned that trade conflicts could push inflation “to be higher than previously expected,” particularly in the US, where it is now forecasted to rise to 2.8% in 2025. The organization factored in new US tariffs on trade with Canada, Mexico, and China but did not account for possible reciprocal levies or measures targeting the European Union.

Canada’s growth projection has been slashed from 2.0% to 0.7%, while Mexico is now expected to see a 1.3% economic contraction instead of the previously anticipated 1.2% growth. European economies, though less directly affected by tariffs, still face “heightened geopolitical and policy uncertainty” that could dampen growth.

For the second consecutive report, the OECD has downgraded growth projections for France and Germany to 0.8% and 0.4%, respectively. The UK’s outlook has also dropped to 1.4%, with Spain being the only major European economy expected to maintain strong performance at 2.6% in 2025.

“Significant risks remain,” as additional tariffs between major economies “would hit growth around the world and add to inflation.” However, the OECD noted that rising European defense spending in response to geopolitical threats could “support growth in the near-term, but potentially add to longer-term fiscal pressures.“