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President Trump’s tariff regime threatens to significantly crimp U.S. economic growth this year while boosting inflation, the Organization for Economic Cooperation and Development said in a new forecast that sharply cut its outlook.
The Paris-based research group said Tuesday it expects U.S. gross domestic product to decelerate sharply to 1.6% in 2025 from 2.8% in 2024. The OECD previously expected U.S. GDP to grow by 2.2% this year, but cut its forecasts due to the effects of Trump’s tariffs, retaliation from other countries, uncertainty around economic policy and slower immigration.
The OECD also expects U.S. inflation, as measured by the personal-consumption expenditures price index, to pick up to 3.9% by the end of the year, which the group said could prevent the Federal Reserve from cutting rates again until next year. The index was up 2.1% in April from a year earlier.
The OECD’s new estimates echo other mainstream forecasts for the American economy this year. Goldman Sachs expects U.S. GDP growth of 1.7%, while the Federal Reserve in March downgraded its estimate to 1.7% from 2.1% previously.
The OECD downgrade “adds more credibility to the private-sector view that the U.S. economy will feel a cold wind until we start getting clarity on the trade and tax environment that businesses and households will face,” said ING’s Chief International Economist James Knightley. “They are confirming the view that while Donald Trump’s policies may generate some positives for the U.S. economy over time, there will be a tricky and potentially quite painful transition period for parts of the economy,” Knightley said.
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