The global economy is slowing. In a sharply downgraded forecast released Tuesday, the Organisation for Economic Co-operation and Development warned that President Donald Trump’s volatile yet sweeping tariff policies are inflicting greater damage than expected, with the effects more concentrated in the U.S. than anywhere else.
The group now expects annual GDP growth in the U.S. to slow to 1.6% in 2025, down from its earlier projection of 2.2%. That substantial downward revision — over a quarter drop in anticipated growth — underscores just how sharply expectations have deteriorated.
The trade war hits home hardest
The OECD now expects global growth of 2.9% in 2025, but warns that “the slowdown is concentrated in the U.S., Canada, Mexico, and China,” the countries most exposed to tariff shocks.
Bloomberg charts using Bureau of Economic Analysis data show a record collapse in U.S. net exports in the first quarter 2025 — the steepest drop on record — reinforcing the OECD’s warning that Trump’s trade policy is disproportionately damaging the U.S. economy.
The warning comes amid other mounting signs of economic strain. The ISM manufacturing imports index just fell to 39.9, its lowest reading since 2009 — a signal of collapsing demand. The S&P 500 is lagging global stocks by more than 12 percentage points year-to-date, its worst relative performance since 1993.
Perhaps unsurprisingly, the strain appears to be weighing on U.S. business leaders, too. Some 83% of U.S. CEOs now expect a recession in the next 12 to 18 months, according to Conference Board data released last week.
The U.S. trails the pack
The disruption from Trump’s tariffs could surpass the turbulence of the 2018-19 trade war, with rising costs, diminished investment, and worsening inflation, the OECD said.
In all, the report paints a vivid picture of U.S. trade wars cascading through the global economy, then boomeranging back onto the U.S. itself.
When tariffs rise, their effects don’t hit all at once — they feed through the system. First, importers face higher costs, which get passed along to manufacturers, retailers, and eventually consumers. Businesses facing squeezed margins may delay investment, cut hiring, or raise prices.
Over time, those choices spread outward, dampening demand, slowing growth, and dragging down productivity more broadly. The result isn’t always an immediate shock. More often, it’s a slower burn, where uncertainty and higher costs quietly erode economic momentum quarter by quarter.