OECD Further Cuts U.S. Growth Forecast Amid Tariff TurmoilJune 11,2025

OECD Further Cuts U.S. Growth Forecast Amid Tariff Turmoil

The global economic policy group blamed the downgrade on President Donald Trump’s tariff policies.

By Tim Smart

Source: U.S. News

Justin Sullivan|Getty Images

A truck drives by stacked shipping containers at the Port of Oakland, May 20, 2025, in Oakland, Calif.

The Organization for Economic Co-operation and Development on Tuesday further downgraded the outlook for U.S. economic growth this year, citing continued concerns over President Donald Trump’s ever-changing tariff policies.

The OECD now sees 2025 growth in the U.S. falling to 1.6% from 2.2% back in March. The organization also trimmed global growth forecasts.

Global economic prospects are weakening, with substantial barriers to trade, tighter financial conditions, diminishing confidence and heightened policy uncertainty projected to have adverse impacts on growth, according to the OECD’s latest economic outlook.

“The global economy has shifted from a period of resilient growth and declining inflation to a more uncertain path,” OECD Secretary-General Mathias Cormann said in a statement. “Our latest economic outlook shows that today’s policy uncertainty is weakening trade and investment, diminishing consumer and business confidence and curbing growth prospects.”

Economic activity has been mixed since Trump launched his “Liberation Day” tariffs on April 2. While the labor market has held up and consumer spending has remained steady, volatility and uncertainty have increased as Trump waffles on tariffs. Stock and bond markets have see-sawed.

Private economists have also downgraded their forecasts, but only a minority are predicting a recession. Some analysts see strong demand for artificial intelligence software and hardware as a sign the U.S. economy is entering a new era.

“We think the U.S. economy can handle either rate without falling into a recession,” Alan Wynne, global investment strategist at J.P. Morgan Private Bank, said in a recent client note. “The immediate market response seems to agree, and tariffs seem to be blending into becoming one of the many things driving markets, rather than the only thing, as was the case just a month ago.”

The downgrade comes as analysts wait for the monthly jobs report from the Labor Department due out on Friday. Forecasts call for 125,00 jobs to be added, a downshift from the 177,000 in April.

Also, this week the Senate takes up the “one beautiful bill” budget plan recently passed by the House. Slowing economic growth could embolden senators who say the House has not done enough to cut federal spending.

The Committee for a Responsible Federal Budget says that “Although the concurrent budget resolution called for the House to cut mandatory spending by $2 trillion over the next decade,” the House bill would only reduce total projected spending by about $700 billion and that extension of the 2017 tax cuts would reduce revenue, adding about $3 trillion to the federal debt over the next decade.

Meanwhile, the Federal Reserve is essentially on hold with interest rates pending further clarity on Trump’s tariffs. But a slowing economy, especially if it leads to layoffs, could give the Fed room to lower interest rates.

“The reasons why we downgraded almost everybody in our forecast is that trade uncertainty and economic policy uncertainty has reached unprecedented levels,” OECD Chief Economist Alvaro Pereira said in an appearance on CNBC’s “Squawk Box Europe” Tuesday.

Source: https://www.usnews.com/news/economy/articles/2025-06-03/oecd-further-cuts-u-s-growth-forecast-amid-tariff-turmoil