OECD’s Revised Growth Forecast Amid Trade and Inflation Challenges

The Organisation for Economic Co-operation and Development (OECD) released its latest Economic Outlook, revising global growth projections for 2025 downward to 3.1% from 3.3%, as reported in their March 2025 Interim Report.

This adjustment reflects heightened trade tensions and persistent inflation, with specific impacts on major economies. The US growth forecast dropped to 2.2% from 2.4%, with inflation rising to 2.8% from 2.1%, while Canada and Mexico face significant slowdowns at 0.7% and -1.3% respectively, compared to earlier estimates of 2.0% and 1.2%.

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A key driver is President Trump’s proposed tariffs, assuming a 25 percentage point increase on most merchandise imports from Canada and Mexico starting April 2025, as noted in the OECD report. These tariffs are expected to raise consumer prices significantly, affecting goods like Mexican produce (e.g., strawberries, avocados) and Canadian oil, with potential car price increases of nearly $6,000, as per impact assessments impact of Tarrifs on Consumer prices. The average American household could face an additional $930 cost in 2026 due to these tariffs, rising to $1,200 with China tariffs, according to the Peterson Institute for International Economics cost to households.

OECD Secretary-General Mathias Cormann emphasized the uncertainty, stating, “There’s a very significant level of uncertainty right now, and it is clear that the global economy would benefit from increases in certainty when it comes to trade policy settings,” as reported by CNBC. The organization warns of risks from further trade barriers, calling for international cooperation to mitigate these challenges. Policymakers face the task of balancing monetary and fiscal policies to support growth while controlling inflation, amidst a volatile global economic landscape.

This table summarizes the OECD’s projections, highlighting the downward revisions and their implications for economic policy.