The Organisation for Economic Co-operation and Development (OECD) has revised its economic growth forecasts, warning of global impacts from ongoing US trade policies.

In its latest report, released on June 3, 2025, the OECD predicts that the US economy will grow by 1.6% in 2025, down from an earlier forecast of 2.2% in March.

The OECD attributes this slowdown to higher tariffs, retaliatory trade measures, reduced net immigration, and cuts to the federal workforce.

Globally, the organization projects economic growth of 2.9% for 2025, a decrease from its previous estimate of 3.1%. These projections assume that global tariffs remain at current levels.

The report highlights the uncertainty caused by tariffs. OECD Secretary-General Mathias Cormann noted that this uncertainty is weakening trade and investment.

The expected economic slowdown will mainly impact the US, Canada, Mexico, and China—countries most affected by the trade policies.

🔗 Source: CNN

🧠 Food for thought

1️⃣ Historical precedents show trade wars consistently hurt economic growth

The current OECD forecast echoes outcomes from previous U.S. trade disputes, particularly the Smoot-Hawley Tariff Act of 1930.

When that legislation raised tariffs during the Great Depression, U.S. exports plummeted by 61% within three years as trading partners retaliated with their own barriers 1.

More recently, President Bush’s 2002 steel tariffs of 8-30% led to job losses in steel-using industries and retaliatory measures from the European Union, demonstrating how protectionism often backfires 1.

The current trajectory is concerning as the average effective tariff rate is projected to reach 27%, the highest since 1903, with far-reaching consequences beyond the targeted sectors 2.

Historical data shows that tariffs disrupt global supply chains, reduce export opportunities, and ultimately slow economic growth rather than protecting domestic industries as intended.

2️⃣ Tariffs place disproportionate burdens on lower-income households

The OECD’s concern about widespread economic damage aligns with research showing tariffs function as regressive taxes that hit vulnerable populations hardest.