The global economy has held up better than expected in the face of rising U.S. protectionism and elevated policy uncertainty, but GDP growth is projected to slow over the coming year as the negative effects of higher tariffs and erratic policy weigh on trade and investment in 2026, the Organization for Economic Cooperation and Development (OECD) said.
The Paris-based group released its latest quarterly economic forecast, which now sees global growth slowing to 3.2% this year, down from 3.3% in 2024. That is 0.3 percentage points better than it expected in June, but it still projects global growth will slow to 2.9% in 2026 as the fallout from trade turmoil increasingly filters through.
“Global growth proved more resilient than expected in the first half of 2025, especially in many emerging markets,” the OECD said. The U.S. also held up better, as “industrial production and trade were buoyed by front-loading ahead of higher tariffs.”
As a result, the OECD’s forecast for the U.S. has improved slightly. It now sees U.S. growth at 1.8% this year, 0.2 points better than its previous call, though still a sharp slowdown from the 2.8% posted in 2024. Growth is expected to slow further to 1.5% in 2026 due to higher tariffs, weaker immigration and cuts to the federal government workforce.
“While the full impact of tariff increases is still unfolding, early signs of effects are visible in consumer behaviour, labour markets and prices,” the report said. “Labour markets are softening, with higher unemployment and fewer job openings in some economies, while disinflation has stalled in many economies as food prices rose and services inflation remained persistent.”
The OECD said downside risks remain elevated, including the threat of further tariff hikes and rising inflation pressures weighing on growth.
It also flagged increased concerns about fiscal risks, warning that “financial market repricing, including of volatile crypto-assets, could pose additional financial stability concerns.”
Against this backdrop, Canada is projected to record 1.1% growth this year and 1.2% in 2026, both forecasts up 0.1 point from the OECD’s previous call.
GDP growth for the euro area is forecast to slow to 1.2% in 2025 and 1.1% in 2026, “with increased trade frictions and geopolitical uncertainty somewhat offset by stronger public investment and easier credit conditions.”
The OECD said inflation is expected to ease in most G20 countries as growth and labour markets weaken.
“However, inflationary pressures could resurface,” it cautioned, noting companies have initially absorbed some of the added costs of higher tariffs, reducing their margins.