OECD cuts US growth forecast to 1.6% for 2025 amid Trump’s tariff surge; India to grow steadily at 6.3%
The Organisation for Economic Co-operation and Development (OECD) has projected a sharp deceleration in US economic growth, forecasting it to slow to 1.6% in 2025 from 2.8% in the previous year.
The OECD attributed the weakening outlook to the steep tariff increases implemented under President Donald Trump, which it said are likely to trigger inflationary pressures and dampen business activity.
According to the OECD’s latest Economic Outlook 2025, released on Tuesday, the US economy will see further deceleration in 2026, with growth slipping to 1.5%.
The report highlights that the average US tariff rate has jumped from around 2.5% to 15.4% since Trump returned to office—its highest level since 1938.
The tariff hikes include a blanket 10% duty on imports from most countries, along with a 25% levy on steel, aluminium, and auto products.
Trump also recently announced plans to double the tariff on steel and aluminium imports to 50%, citing the need to shield domestic industries.
“Domestic price increases are likely to follow higher tariffs, although the exact magnitude is subject to some uncertainty,” the OECD said, noting that about 10% of the US consumer basket comprises imported goods.
It warned that consumers and businesses would bear the brunt of these additional costs.
OECD chief economist Álvaro Pereira said the tariff escalation would likely ripple through the global economy.
“Additional tariffs would further reduce global growth prospects and fuel inflation, dampening global growth even more,” he cautioned.
The report forecasts that the global economy will also feel the strain, with growth expected to fall to 2.9% in both 2025 and 2026.
That compares with global expansion of 3.3% in 2024 and 3.4% in 2023.
Pereira added that while inflation has been cooling in many countries, rising protectionism is reversing those gains, and inflation expectations have climbed significantly in several major economies.
China, the world’s second-largest economy, is projected to grow at a slower pace, with GDP growth declining from 5% in 2024 to 4.7% in 2025 and 4.3% in 2026. In response to the cooling economy, Beijing has unveiled several stimulus measures, including interest rate cuts, increased lending by state banks, and funding support for industrial upgrades, Associated Press reported.
India, however, stands out as a bright spot in the global outlook. The OECD expects the Indian economy to grow at 6.3% in 2025, up slightly from 6.2% in 2024.
Growth is projected to inch up further to 6.4% in 2026, signaling resilience amid global headwinds.
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