The Organisation for Economic Co-operation and Development (OECD) has raised its global economic growth forecast to 3.2 percent for 2025, up from its June forecast of 2.9 percent. This revision reflects greater-than-expected resilience in the global economy despite mounting concerns over U.S. trade policies, notably the sweeping tariffs implemented under President Donald Trump's administration. Although the revised forecast represents a slight deceleration from the 3.3 percent growth recorded in 2024, the OECD maintained its 2026 worldwide growth projection at 2.9 percent. The incremental upgrade is attributed to factors such as robust investment in artificial intelligence (AI) in the United States, fiscal support measures in China, and front-loading of imports before tariff hikes took effect.
The global economy has absorbed the tariff shock better than anticipated, with companies coping initially by tightening profit margins and drawing down inventory stockpiles built in advance of tariff enforcement. By August 2025, the effective tariff rate on U.S. imports surged to an estimated 19.5 percent, the highest level since 1933 during the Great Depression. Despite this significant tariff escalation, the immediate negative impact on global economic growth has been somewhat cushioned by strategic business adjustments and policy interventions.
In the United States, AI investments have emerged as a critical growth driver, supporting economic activity in the face of trade-related uncertainties. The OECD upgraded its U.S. growth forecast to 1.8 percent for 2025 from the earlier 1.6 percent, despite this still representing a notable slowdown from the 2.8 percent growth seen in 2024. Growth in the U.S. is expected to decelerate further to 1.5 percent in 2026 as tariff-related pressures and policy uncertainty weigh on investment and trade. In China, fiscal support has played a key role in cushioning the slowdown, with the country’s growth forecast increased to 4.9 percent for 2025 from 4.7 percent, before moderating to 4.4 percent in 2026.
Regionally, the economic picture remains mixed. The eurozone's growth forecast was upgraded to 1.2 percent for 2025 from 1.0 percent but is expected to slow to 1.0 percent in 2026 as trade tensions offset gains from lower interest rates. Japan’s growth outlook improved to 1.1 percent for 2025, supported by corporate profits and recovering investment, before easing to 0.5 percent in 2026. The United Kingdom’s forecast was raised slightly to 1.4 percent for 2025 with no change to its 1.0 percent projection for 2026.
Despite these upgrades, the OECD warns that the full economic impact of tariffs is yet to be felt. OECD Chief Economist Alvaro Santos Pereira highlighted the significant repercussions on the U.S. economy and the ripple effects on global markets. Emerging signs of economic softening include declines in industrial production across several countries and moderated consumer spending. Labor markets are showing early signs of deterioration, with rising unemployment rates and fewer job openings in some regions. The disinflation process appears to have stalled, with headline inflation expected to be 3.4 percent across G20 nations in 2025.
Central banks are anticipated to continue monetary easing policies, with the Federal Reserve expected to implement further rate cuts as labor markets weaken, assuming tariffs do not trigger broader inflationary pressures. The Federal Reserve has already reduced rates by 25 basis points in September, lowering the federal funds rate to 4.0-4.25 percent, with projections indicating additional cuts through the year.
The OECD also identified multiple risks that could derail the positive growth outlook. These include the potential for further tariff increases, resurgence of inflation, fiscal challenges, and adjustments in financial markets. The report emphasizes the need for coordinated policy efforts to address trade policy uncertainty, enhance supply chain resilience, and maintain fiscal sustainability. Structural reforms that reduce policy uncertainty and foster business investment and entrepreneurship are recommended to support long-term growth.
In summary, while the OECD revised its global growth forecast upward to 3.2 percent for 2025 on the back of greater economic resilience, AI investments, and fiscal support, it cautions that significant risks persist. The full effect of trade-related shocks remains to be seen, and the outlook for 2026 continues to show a moderate slowdown, underscoring the fragile balance between recovery and emerging economic headwinds in the current global landscape.
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