OECD Boosts Global Growth Outlook for 2025 Amid AI Surge and Trade Tariff Challenges

OECD Lifts Global Growth Forecast for 2025

The Organization for Economic Cooperation and Development (OECD) has upgraded its forecast for global economic growth in 2025 to 3.2%, buoyed by an investment boom in artificial intelligence (AI) which is helping to offset the economic drag caused by U.S. trade tariffs. Despite mounting tariff pressures, the resilience of major economies and strong AI-driven productivity gains are supporting overall expansion.

Key Economy Upgrades

United States: Growth forecast raised to 2% in 2025, up from 1.8%, supported by AI investments, government subsidies, and expected Federal Reserve interest rate cuts. Growth moderates to 1.7% in 2026 despite tariffs pushing the effective tariff rate from 2.5% to 14% in 2025.
China: Expected to grow 5% in 2025, slightly above the previous 4.9%, before slowing to 4.4% in 2026 as fiscal stimulus fades and new U.S. tariffs impact trade.
Eurozone: Growth revised up to 1.3% in 2025 from 1.2%, driven by solid labor markets and increased public spending in Germany, with a projected 1.2% growth in 2026.
Japan: Forecasted to grow 1.3% in 2025, aided by strong corporate profits, before easing to 0.9% in 2026.

Risks from Tariffs and Inflation

While growth forecasts have improved, the OECD warns of ongoing risks. Tariffs are causing higher inflation, with U.S. inflation expected to average 3% in 2026—above the Federal Reserve’s 2% target—before easing in 2027. Trade tensions continue to threaten investment and consumer spending worldwide.

Global trade growth is forecast to slow from 4.2% in 2025 to 2.3% in 2026 as tariffs suppress economic activity.
High market valuations driven by optimism around AI could result in sharp corrections if expectations are unmet.

The Role of Artificial Intelligence in Economic Resilience

The investment surge in AI is playing a pivotal role in cushioning economies against tariff shocks:

AI advances are boosting productivity across sectors, underpinning stronger growth.
Government support and anticipated policy easing (including interest rate cuts) are mitigating downside risks.
AI-related optimism, however, also introduces volatility risks in capital markets.

What This Means for Businesses and Consumers

This revised outlook suggests cautious optimism:

Businesses can expect moderate growth with new opportunities emerging in AI-driven technologies.
Consumers should anticipate higher inflation pressures in the near term, particularly in economies heavily affected by tariffs.
Policymakers face the delicate task of balancing inflation control with sustaining growth momentum.