The economy has not yet felt the impact of US duties, the OECD said. When will the effect be felt?

According to the Organization for Economic Cooperation and Development, the world economy has yet to feel the full effect of Donald Trump's duties. The OECD (or the so-called "club of developed countries") believes that so far the economy is doing better than expected due to the fact that companies are selling off inventories and taking on some of the costs. Against this backdrop, the organization raised its global growth forecast for 2025, as well as its expectations for U.S. GDP growth, but warned that the effects of trade wars will be stronger in 2026.

Donald Trump's duties on US imports have not yet fully affected the global economy, the OECD said. In its latest interim forecast, the "club of developed countries" said that so far global growth looks stronger than expected, with companies softening the blow by absorbing some costs and selling off inventories.

"The full impact of these duties will become clearer as companies exhaust the stocks accumulated in anticipation of the duties and as higher tariffs are imposed," OECD head Matthias Kormann, quoted by Reuters, said at a press conference. By the end of August, the average effective duty rate on U.S. imports reached about 19.5% - the highest since the height of the Great Depression in 1933, the agency emphasized.

Against this background, the OECD improved its forecast for global economic growth in 2025. Now the organization expects it to be 3.2% against 3.3% a year earlier, while in June it expected only 2.9%. For the U.S. economy, the OECD also raised the forecast and now predicts GDP growth in 2025 by 1.8% instead of the previously estimated 1.6%. This compares with 2.8% in 2024. Growth will be supported by a boom in AI investment, fiscal stimulus and Fed rate cuts, the OECD said. This, it said, should partly offset pressures from higher duties, lower migrant inflows and a decline in federal jobs.

The OECD has warned that the main consequences of Donald Trump's trade policy will manifest themselves in 2026. For example, the stockpiling effect is already waning, and higher duties are expected to curb investment and trade growth. "Additional increases in barriers to trade or prolonged policy uncertainty could reduce [GDP] growth, raising production costs and putting pressure on investment and consumption," Kormann said. At the same time, the organization maintained its 2026 global GDP growth forecast at 2.9 percent and U.S. GDP at 1.5 percent. By comparison, the Fed expects the U.S. economy to grow by 1.8% next year.

The OECD believes that against the backdrop of a slowing global economy, most major central banks will cut rates or maintain a soft policy in the coming year, provided inflation continues to fall. The U.S. Federal Reserve, according to the forecast, will also continue easing if the weakening labor market is not accompanied by an increase in inflation due to duties.

This article was AI-translated and verified by a human editor