Global economic growth is set to be slower this year largely because of Donald Trump’s US tariffs, according to a leading international policy group.
Worldwide growth is now expected to slow to a “modest” 2.9%, down from a previous forecast of 3.1%, said the Organization for Economic Co-operation and Development (OECD).
It blamed a “significant” rise in trade barriers and warned that “weakened economic prospects will be felt around the world, with almost no exception”.
That will include the UK, the OECD said, as it trimmed the country’s growth forecasts. But it added Britain was facing its own challenges and should consider raising tax revenues as a means of “strengthening the public finances”.
Since the US president returned to the White House, a long list of countries have been targeted by tariffs, but Trump’s unpredictable approach to implementing the measures has created widespread uncertainty.
“We are forecasting basically a downgrade for almost everybody,” Alvaro Pereira, the OECD’s chief economist told the BBC.
“We’ll have a lot less growth and job creation than we had forecasted in the past.”
The group also slashed the outlook for the US economy this year from 2.2% to 1.6% and predicted growth would slow again in 2026.
It warned that the US was at risk from rising inflation, something that Trump repeatedly promised would fall during his presidential campaign.
Prior to the release of the OECD report on Tuesday, Trump wrote on social media: “Because of Tariffs, our Economy is BOOMING!”
However, the most recent official data showed the US economy shrank at an annual rate of 0.2% in the first three months of this year, the first contraction since 2022.
Meanwhile, the OECD trimmed its expectations for UK growth this year to 1.3% from the 1.4% it had predicted in March.
It also forecast the UK economy would expand by 1% in 2026, compared to the 1.2% it pencilled in a few months ago.
The OECD said UK growth would be “dampened by heightened trade tensions” as well as “elevated uncertainty”.
But the group said the Britain had other issues, in particular substantial government debt interest payments and a “very thin” financial buffer.
In March, Chancellor Rachel Reeves was forced to announce £14bn in measures, including £4.8bn in welfare cuts, to restore headroom against her self-imposed fiscal rules.
While the OECD highlighted better-than-expected UK economic growth, which strengthened to 0.7% between January and March, the cautioned that “momentum is weakening” due to “deteriorating” business sentiment.
It suggested that Reeves should raise tax revenues, including by closing loopholes and by re-evaluating council tax bands based on updated property values.
Under the current system, council tax in England is calculated based on the price the property would have sold for in April 1991. For Wales, it is evaluated on property prices in April 2003.
Next week, Reeves will set out her Spending Review where she faces tough choices on allocating departmental budgets.
The OECD said: “Strengthening the public finances remains a priority, by delivering on the government’s ambitious fiscal plans, including through the upcoming Spending Review.”
The government has already committed billions of pounds to defence, while the NHS is also expected to be a focus amid Labour’s pledge to reduce waiting lists.
