Full impact of Trump’s tariffs yet to be felt by world economy: OECD

Wednesday, 24 September 2025

In June, the OECD cut its forecast from 3.1% to 2.9%, but has now raised the projection to 3.2%.

The world economy will beat initial expectations this year as it adjusted to President Donald Trump's tariffs, but their full impact remains uncertain, the OECD said in its latest interim global outlook report.

In June, the OECD cut its forecast from 3.1% to 2.9%, warning at the time that Trump's tariffs would stifle the world economy.

But in an updated outlook released last night, it raised the projection to 3.2%.

The OECD also upgraded the growth outlook of the US for 2025 to 1.8% from 1.6%; and revised upwards projections for China to 4.9%, the Eurozone to 1.2% and Japan to 1.1%.

Despite these upward revisions, the report highlights 'significant risks' such as the potential impact of tariffs yet to be felt. US bilateral tariff rates have increased on almost all countries since May, with the overall effective US tariff rate rising to an estimated 19.5% at the end of August, the highest rate since 1933.

“Early signs of effects are visible in consumer behaviour, labour markets and prices,” it said.

“Labour markets are softening, with higher unemployment and fewer job openings in some economies, while disinflation has stalled in many economies as food prices rose and services inflation remained persistent.”

Further tariff hikes and renewed inflation pressures could weigh on growth, as could financial markets repricing assets - including “volatile crypto-assets”.

“On the upside, easing trade restrictions or faster advances in AI could support stronger outcomes,” the OECD said.

It warned that central banks should remain vigilant, and, provided inflation expectations remain well anchored, “interest rate reductions should continue in economies in which underlying inflation is projected to moderate”.

“Maintaining central bank independence will preserve policy credibility and reduce the volatility and persistence of inflation,” it added, possibly in reference to the Trump administration’s efforts to fire and replace members of its own Federal Reserve.

New Zealand will announce its new central bank governor today.

Specific OECD data for New Zealand was released in June. At the time, the OECD had reported a decline in this country’s economic growth, driven by weaker investment and trade tensions.

Despite a soft start to the year, the OECD forecast a gradual recovery driven by domestic demand, with growth expected to pick up later in 2025 and into 2026.

New Zealand's GDP was subsequently found to have fallen 0.9% in the June 2025 quarter, following a 0.9% rise in the March quarter. Economic decline was widespread, with 10 of 16 industries shrinking, and manufacturing and construction contracting most markedly.