The Organisation for Economic Co-operation and Development (OECD) recently raised its forecast for global economic growth. The source of this increase is better-than-expected results across a range of economies. The OECD, for one, sees U.S. growth peaking at 1.8% in 2025 and falling to 1.5% by 2026. This significant change exhibits the surprising strength of the U.S. economy in the face of increasing tariffs and inflationary headwinds.
The OECD’s new, and still cautionary, forecasts nonetheless present a brighter short-term picture for the world economy. They predict an even stronger 2.9% growth rate for 2026. To be sure, this is a welcome trend against the backdrop of persistent, difficult trade headwinds and property sector weakness. The OECD was clear that rigorous public investments in AI have greatly enhanced US economic productivity.
The nonprofit, which previously estimated U.S. inflation was not expected to subside past 3.2% until 2025, adjusted its outlook to 2.7% over that same timeframe. This is a big departure from previous projections. That’s a sign that the inflationary pressures that have hurt consumers and businesses alike are starting to let up.
“US bilateral tariff rates have increased on almost all countries since May. The overall effective US tariff rate rose to an estimated 19.5% at the end of August, the highest rate since 1933,” – OECD
As US-China tariff rates kept increasing, the OECD (Organization for Economic Cooperation and Development) warned of growing hazards to the economic forecast. Concerns center around further tariff increases and renewed inflationary pressures, which could impact consumer behavior and business investment moving forward. The organization noted that “the full effects of tariff increases have yet to be felt,” as companies initially absorb some increases through profit margins.
In spite of these threats, the OECD pointed out that fiscal support in excess of China has offsetting effects on adverse impacts from trade complexities. Thanks to this support, industrial production and trade remain robust, with emerging-market economies driving most of this growth and contributing all but a sliver of global growth.
“Global growth was more resilient than anticipated in the first half of 2025, especially in many emerging-market economies,” – OECD
Unfortunately, the OECD’s report exposes a sad truth. States and municipalities now face new export tariff barriers at 0% that in other trading markets can increase to upwards of 50%. This dramatic increase in the tariff rate has raised fears of significant repricing in financial markets and destabilization of the broader economy.