OECD Warns Tariffs and AI Could Strain Growth
- Global growth seen at 3.2% in 2025, easing to 2.9% in 2026
- US growth revised up to 2% in 2025, to cool to 1.7% in 2026
- China’s growth steady at 5% in 2025, to slow to 4.4% in 2026
Global Outlook and Risks
The Organisation for Economic Cooperation and Development reported that global growth is performing better than expected, supported by AI-related investment. Its latest Economic Outlook projects growth slowing from 3.2% in 2025 to 2.9% in 2026, before recovering to 3.1% in 2027. OECD Secretary-General Mathias Cormann noted that the impact of U.S. tariffs has so far been limited but warned costs will rise as firms deplete inventories. Investor enthusiasm for AI could also trigger a correction if expectations prove unrealistic.
Country Forecasts
The U.S. economy is now forecast to expand by 2% in 2025, up from 1.8% previously, before easing to 1.7% in 2026. AI investment, fiscal support, and anticipated Federal Reserve rate cuts are helping offset tariff pressures, though large deficits and rising debt pose long-term risks. China’s growth is expected to remain at 5% in 2025, then slow to 4.4% in 2026 as fiscal support fades and tariffs take effect. The euro zone outlook has been revised slightly higher to 1.3% in 2025, with growth moderating to 1.2% in 2026 due to budget tightening in France and Italy.
Trade and Inflation Trends
Global trade growth is projected to decline from 4.2% in 2025 to 2.3% in 2026 as tariffs weigh on investment and consumption. Inflation is expected to gradually return to central bank targets by mid-2027, though U.S. inflation may peak in 2026 due to tariff pass-through. China and other emerging markets could see modest price increases as excess production capacity diminishes. Most major central banks are likely to maintain or lower borrowing costs, with the Federal Reserve expected to cut rates slightly by late 2026.
Counterpoint Research estimates foldable smartphones will account for less than 2% of the global market this year, rising to under 3% by 2027. While unrelated to the OECD’s economic forecast, this highlights how niche technology sectors like foldables contrast with the broader AI boom driving investment. Analysts suggest that AI’s rapid adoption could reshape productivity across industries, but warn that inflated expectations may create volatility in financial markets. The OECD’s cautious stance reflects both the promise of technological innovation and the risks of escalating trade disputes.
