Global economic growth has been downgraded by the Organisation for Economic Co-operation and Development (OECD) – as the impact of US President Donald Trump’s tariffs becomes apparent.
Major economies including the UK will have lower rates of GDP – a measure of an economy’s value and everything produced – due to the US’s imposition of taxes on some goods it imports, the Paris-based OECD club of 38 rich countries said.
The UK economy will grow only 1.4% this year, as opposed to the 1.7% previously anticipated.
Next year, the figure will be 1.2%, lower than the 1.3% forecast before Mr Trump took office in January, according to the OECD interim economic outlook.
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It’s more unwelcome news for Chancellor Rachel Reeves after January GDP unexpectedly shrank. The government have repeatedly said growing the economy is their number one priority.
In response to the OECD figures, Ms Reeves pointed out the UK is forecast to be “Europe’s fastest growing G7 economy over the coming years – second only to the US”.
“This report shows the world is changing, and increased global headwinds such as trade uncertainty are being felt across the board.”
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Reeves reacts to growth figures
Global GDP will slow, the OECD said, from 3.2% in 2024 to 3.1% in 2025 and 3% in 2026 due to the higher trade barriers caused by the tariffs and the policy uncertainty around their implementation.
US growth has been revised downward to 2.2% in 2025 and 1.6% in 2026. Higher GDP of 2.4% and 3.1% had been expected for this year and next.
While the Eurozone has not escaped the downgrades it is less impacted than first thought, the report said.
“European economies will experience fewer direct economic effects from the tariff measures incorporated in the baseline projections, but heightened geopolitical and policy uncertainty is still likely to restrain growth,” it said.
What’s happening with tariffs?
After some false starts, where levies were announced and paused last minute or not brought into effect at all, tariffs are now in effect on some goods coming from China.
A 25% tariff on all steel and aluminium imports to the US came into effect earlier this month.
Tariffs on Canada and Mexico were suspended until 2 April.
The full effect of tariffs has also yet to be felt as EU retaliatory taxes on US goods are yet to take effect.
In response, Mr Trump said he would impose a 200% tariff on EU alcohol – including wine and champagne.
Consumers to be hit
It’s consumers who will pay the price for the additional taxes, the OECD said.
“Consumers face much of the burden of higher tariffs” as it warned of a “significant” impact on living standards.
