US economic growth to slow to 1.6 per cent, OECD | Australian Markets

US economic growth will slow to 1.6 per cent this 12 months from 2.8 per cent final 12 months as President Donald Trump’s erratic trade wars disrupt international commerce, leaving companies and shoppers paralysed by uncertainty, the OECD says.

The Organisation for Economic Cooperation and Development forecast the US financial system – the world’s largest – will slow additional to simply 1.5 per cent in 2026.

Trump’s insurance policies have raised average US tariff charges from round 2.5 per cent to 15.4 per cent, the very best since 1938, in accordance to the OECD.

World economic growth will slow to simply 2.9 per cent this 12 months and keep there in 2026, in accordance to the forecast. It marks a substantial deceleration from growth of 3.3 per cent international growth final 12 months and three.4 per cent in 2023.

The world financial system has confirmed remarkably resilient lately, persevering with to increase steadily within the face of international shocks such because the COVID-19 pandemic and Russia’s invasion of Ukraine.

But international trade and the economic outlook have been clouded by Trump’s sweeping taxes on imports, the unpredictable manner he is rolled them out and the risk of retaliation from different international locations.

Reversing a long time of US coverage in favour of freer world trade, Trump has levied 10 per cent tariffs on imports from virtually each nation. He’s additionally threatened more import taxes, together with a doubling of his tariffs on metal and aluminium to 50 per cent.

Without mentioning Trump by identify, OECD chief economist Álvaro Pereira wrote in a commentary to accompany the forecast that “we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment.”

China – the world’s second-biggest financial system – is forecast to see growth decelerate from 5 per cent final 12 months to 4.7 per cent in 2025 and 4.3 per cent in 2026.

Chinese exporters will likely be damage by Trump’s tariffs, hobbling an financial system already weakened by the collapse of the nation’s real estate market. Some of the harm will likely be offset by help from the federal government: Beijing final month outlined plans to cut rates of interest and encourage bank lending in addition to allocating more money for manufacturing unit upgrades and elder care, amongst different issues.

The 20 international locations that share the euro currency will collectively see economic growth decide up from 0.8 per cent final 12 months to one per cent in 2025 and 1.2 per cent subsequent 12 months, the OECD stated, helped by rate of interest cuts from the European Central Bank.

The Paris-based OECD, comprising 38 member international locations, works to promote worldwide trade and prosperity and points periodic studies and analyses.