The latest Interim Economic Outlook from the Organisation for Economic Co-operation and Development (OECD)  projects global growth slowing from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026, as early stockpiles of goods accumulated in anticipation of higher tariffs are drawn down, and as the implementation of tariffs and continuing policy uncertainty weigh on investment and trade.

While the global economy was more resilient than anticipated in the first half of 2025, downside risks loom large as higher barriers to trade and geopolitical and policy uncertainty continue to weigh on activity in many economies, the report, released September 23 said.

GDP growth in the United States is projected to decline to 1.8% in 2025 and 1.5% in 2026. In the Euro area, growth is expected to be 1.2% in 2025 and 1.0% in 2026. China’s growth is projected to ease to 4.9% in 2025 and 4.4% in 2026.

“The global economy has remained resilient, but the full effects of higher tariffs and policy uncertainty have yet to be felt. Global economic growth is projected to slow, and significant risks remain, as well as concerns about fiscal sustainability and financial stability,” OECD Secretary-General Mathias Cormann said. “To strengthen economic growth prospects, a key priority is to ensure a lasting resolution to trade tensions. We recommend that governments engage productively with one another to make international trading arrangements fairer and function better, in a way that preserves the economic benefits of open markets and rules-based global trade.”

The report said that, amid ongoing policy uncertainty, a key concern is that bilateral tariff rates could be raised further on merchandise imports. This could arise through the application of recent tariff rate increases in the United States and China to a broader range of goods, including pharmaceuticals and semi-conductors. Higher trade barriers could also be adopted in other economies to protect domestic industry against enhanced low-price competition, especially in the event that trade is diverted. In addition to the direct effects through raising costs and final goods prices, such changes could raise policy uncertainty further, with adverse impacts on investment and consumer confidence. 

The associated restructuring of production and supply chains might also result in additional costs that would feed through into prices and dampen growth. On the upside, any agreements that lower bilateral tariff barriers from current levels and improve confidence would support stronger economic growth and trade and lower inflation relative to the baseline.

The OECD said that efforts to prevent further trade fragmentation should be coupled with reforms that enhance security and strengthen the resilience of supply chains, including by encouraging firms to  diversify both suppliers and buyers and by agreements between countries that align regulatory standards on key intermediate production inputs. This would help to balance economic security needs with continued growth while preserving open markets.

The OECD is an international organization of 38 member countries that promotes economic progress, world trade, and sustainable development by serving as a forum for governments to share policy experiences, seek answers to common problems, and identify best practices through evidence-based analysis and policy coordination.