OECD forecasts a sharp economic slowdown and higher inflation in the U.S., citing tariffs

The U.S. economy is facing a significant slowdown this year, with GDP growth expected to drop due to the impact of tariffs and uncertainty surrounding economic policies. According to the Organization for Economic Cooperation and Development (OECD), GDP growth is forecasted to decline to 1.6% in 2025 and 1.5% in 2026, a sharp decrease from the 2.8% growth seen last year.

The OECD report highlighted the introduction of new tariffs as a major factor contributing to the economic slowdown. The Trump administration’s policies have led to a significant increase in import duties, raising the effective tariff rate to 15.4% from 2% in the previous year, the highest rate since 1938. These tariffs are ultimately paid by U.S. importers, leading to higher costs for consumers and an expected spike in inflation to 3.9% by the end of 2025.

OECD chief economist Álvaro Pereira pointed out the rise in trade barriers and economic uncertainty as key factors negatively impacting business and consumer confidence, which in turn hampers trade and investment. The report also highlighted risks for the U.S. economy, including a potential further slowdown in economic activity, increased upward pressure on prices from tariff hikes, and significant financial market corrections.

On a global scale, world economic growth is also expected to slow to 2.9% this year and remain at that level in 2026. This represents a notable deceleration from the 3.3% growth seen last year and 3.4% in 2023.

In conclusion, the economic outlook for the U.S. and the world is facing challenges due to tariffs and policy uncertainty. It is essential for policymakers to address these issues to mitigate the risks of a further economic slowdown and ensure sustainable growth in the future.

This post was contributed by The Associated Press.

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Written by Aimee Picchi, Associate Managing Editor for CBS MoneyWatch, covering business and personal finance. Aimee has a background in journalism from Bloomberg News and has contributed to national news outlets such as USA Today and Consumer Reports.