The growing trade war and rapid policy changes are expected to reduce economic growth in the US and around the world, according to forecasts released Monday.
The resilience revealed last year is slipping. The Organization for Economic Cooperation and Development states in its latest interim economic report. In the US, it could be down from 2.8% growth in 2024 to 2.2% this year and 1.6% next year.
“There are some indications of weakness that are apparent due to increased policy uncertainty,” said Mathias Cormann, executive director of the organization. “Increased trade restrictions contribute to higher costs in both production and consumption.”
President Trump has imposed tariffs on temporary allies such as Canada, Mexico, the European Union, Japan and the UK, as well as longtime rivals like China, including a 25% fine penalty on foreign steel and aluminum. Most have already issued or threatened measures. Trump vowed to impose another tariff next month.
One outcome of the tariffs is that inflation appears to be rising faster than previously thought, explains why the OECD revised its previous estimates published in December. Both business and consumer trust is also declining.
The outlook for 20 euros is limp. Growth is expected to increase by 1% this year. It should rise to 1.2% next year. The most Grimm's forecast is Mexico, with growth expected to fall to 1.3% this year and to minus 0.6% in 2026.
In contrast, India is on track to record its strongest growth. According to the OECD report, GDP rose to 6.3% last year, gross domestic product will rise to 6.4% in 2025 and 6.6% in 2026. The organization warned.
One potential bright spot is artificial intelligence, said Alvaro Santos Pereira, the group's chief economist. AI is “expected to significantly improve labor productivity growth over the next decade,” he said.
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