US growth likely to slow to 1.6% this year, hobbled by Trump's trade
wars, OECD says
[June 03, 2025] By
PAUL WISEMAN
WASHINGTON (AP) — U.S. economic growth will slow to 1.6% this year from
2.8% last year as President Donald Trump’s erratic trade wars disrupt
global commerce, drive up costs and leave businesses and consumers
paralyzed by uncertainty.
The Organization for Economic Cooperation and Development forecast
Tuesday that the U.S. economy — the world's largest — will slow further
to just 1.5% in 2026. Trump’s policies have raised average U.S. tariff
rates from around 2.5% when he returned to the White House to 15.4%,
highest since 1938, according to the OECD. Tariffs raise costs for
consumers and American manufacturers that rely on imported raw materials
and components.
World economic growth will slow to just 2.9% this year and stay there in
2026, according to the OECD's forecast. It marks a substantial
deceleration from growth of 3.3% global growth last year and 3.4% in
2023.
The world economy has proven remarkably resilient in recent years,
continuing to expand steadily — though unspectacularly — in the face of
global shocks such as the COVID-19 pandemic and Russia's invasion of
Ukraine.
But global trade and the economic outlook have been clouded by Trump's
sweeping taxes on imports, the unpredictable way he's rolled them out
and the threat of retaliation from other countries.
Reversing decades of U.S. policy in favor of freer world trade, Trump
has levied 10% taxes — tariffs — on imports from almost every country on
earth along with specific duties on steel, aluminum and autos. He's also
threatened more import taxes, including a doubling of his tariffs on
steel and aluminum to 50%.
Without mentioning Trump by name, OECD chief economist Álvaro Pereira
wrote in a commentary that accompanied the forecast that "we have seen a
significant increase in trade barriers as well as in economic and trade
policy uncertainty. This sharp rise in uncertainty has negatively
impacted business and consumer confidence and is set to hold back trade
and investment.''
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A view of the European currency Euro sculpture, at Germany's main
financial district in Frankfurt, Germany, Wednesday, April 9, 2025.
(AP Photo/Martin Meissner, File)
 Adding to the uncertainty over
Trump’s trade wars: A federal court in New York last week blocked
most of Trump’s tariffs, ruling that he’d overstepped his authority
in imposing them. Then an appeals court allowed the Trump
administration to continue collecting the taxes while appeals worked
their way through the U.S. courts.
China — the world's second-biggest economy — is forecast to see
growth decelerate from 5% last year to 4.7% in 2025 and 4.3% in
2026. Chinese exporters will be hurt by Trump's tariffs, hobbling an
economy already weakened by the collapse of the nation's real estate
market. Some of the damage will be offset by help from the
government: Beijing last month outlined plans to cut interest rates
and encourage bank lending as well as allocating more money for
factory upgrades and elder care, among other things.
The 20 countries that share the euro currency will collectively see
economic growth pick up from 0.8% last year to 1% in 2025 and 1.2%
next year, the OECD said, helped by interest rate cuts from the
European Central Bank.
The Paris-based OECD, comprising 38 member countries, works to
promote international trade and prosperity and issues periodic
reports and analyses.
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