The Organisation for Economic Co-operation and Development (OECD) has raised its global economic forecast, projecting 3.2% GDP growth worldwide in 2025. According to the organisation’s economists, the world economy continues to show surprising resilience despite elevated trade barriers introduced by President Donald Trump’s administration. The negative impact of tariffs is expected to be partially offset by a surge in artificial intelligence investment, fiscal support measures, and anticipated monetary policy easing in major economies. OECD Secretary-General Mathias Cormann noted that the global economy “has proven resilient this year despite fears of a sharper slowdown.”
United States Forecast Revised Upward
The OECD sharply upgraded its outlook for the United States. The U.S. economy is now expected to grow 2% in 2025, compared with the 1.8% forecast in September, and 1.7% in 2026 instead of 1.5%. The organisation estimates that the U.S. effective average tariff rate has risen to around 14%, up from 2.5% at the start of 2025, though still below the 19.5% peak reached in late August.
However, strong AI-related investment and the prospect of gradual Federal Reserve interest rate cuts are helping soften the blow of trade protectionism.
Outlook Improves Across Major Regions
Upward revisions extend beyond the United States:
- China is expected to grow 5% in 2025, up from the earlier 4.9% forecast, before slowing to 4.4% in 2026 as fiscal support wanes and new U.S. tariffs take effect.
- The eurozone is forecast to grow 1.3% in 2025 instead of 1.2%, and 1.2% in 2026, supported by strong labour markets and higher public spending in Germany.
- Japan is expected to grow 1.3% in 2025 (up from 1.1%) and 0.9% in 2026.
- India remains one of the fastest-growing major economies, with a projected 6.7% expansion in 2025.
Tariffs Still Seen as a Drag on Growth
Despite the relatively upbeat outlook, the OECD warns that rising tariffs will remain a significant drag on global growth and continue to exert upward pressure on inflation.
In the United States, inflation is projected to stay above the Federal Reserve’s target even through 2026, averaging around 3%, before easing more visibly in 2027. The OECD expects the Fed to gradually cut interest rates, bringing them down to the 3.25–3.5% range by the end of 2026.
Global Trade Expected to Slow Sharply
The organisation also forecasts a marked slowdown in global trade expansion. Trade volume growth is expected to fall from 4.2% in 2025 to 2.3% in 2026, as higher tariffs weigh on investment and consumer spending.
The OECD further notes that extremely elevated asset valuations — driven by optimistic expectations for AI-related corporate earnings — pose a risk of sharp market corrections if economic growth fails to meet investors’ heightened expectations.
