The world economy will grow more than previously forecast this year after absorbing the shock of US President Donald Trump's tariffs, but their full impact remains uncertain, the OECD said today.
In June, the Paris-based organisation had 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 today, it raised the projection to 3.2%, saying the economy "proved more resilient than anticipated" in the first half of 2025.
The OECD said "front-loading" - companies rushing to import goods ahead of Trump's tariffs - "was an important source of support".
The economy also got a boost from strong AI-related investments in the US and government spending in China. The updated figure is still a slight slowdown from 3.3% in 2024.
"The full effects of tariff increases have yet to be felt - with many changes being phased in over time and companies initially absorbing some tariff increases through (profit) margins," the Organisation for Economic Co-operation and Development said.
"But (they) are becoming increasingly visible in spending choices, labour markets and consumer prices," the report.
'Significant risks remain'
World growth is due to slow to 2.9% in 2026 "as front-loading ceases and higher tariff rates and still-high policy uncertainty dampen investment and trade", the OECD said.
Trump imposed a baseline 10% tariff on imports from around the world in April.
He later hit dozens of countries with even higher duties, but the US leader also left the door open for negotiations, striking deals with Britain, Japan and the European Union, among others.
The US has yet to find a compromise with China, though the world's two biggest economies have temporarily de-escalated their tit-for-tat tariffs while they negotiate.
The overall effective US tariff rate rose to an estimated 19.5% in August, the highest level since 1933, the OECD said.
"Significant risks to the economic outlook remain," the OECD said.
"Amid ongoing policy uncertainty, a key concern is that bilateral tariff rates could be raised further on merchandise imports," it said.
The OECD also warned that inflation could rise as food prices increase, geopolitical tensions push energy prices higher and companies begin to pass the cost of higher tariffs to consumers.
Other concerns include high levels of public debt as well as risks to financial markets.
"On the upside, reductions in trade restrictions or faster development and adoption of artificial intelligence technologies could strengthen growth prospects," it said.
Growth due to slow
The OECD also upgraded the growth outlook of the US for 2025 from 1.6% to 1.8%.
But it warned that growth in the world's biggest economy is expected to slow as "higher effective tariff rates further come into effect and policy uncertainty remains elevated."
A drop in net immigration and cuts in the federal workforce "are also anticipated to soften economic growth".
The OECD raised the growth outlook of other major economies: to 4.9% in China, 1.2% in the euro zone and 1.1% in Japan.
But the OECD flagged a drop in industrial production in recent months in several countries, including Brazil, Germany and South Korea, and moderating consumption in the US, China and the euro zone.
Tech migrants 'key' for US growth, warns OECD chief economist
High-skilled migrants are vital for the US economy, the OECD's chief economist told AFP, after the US imposed a $100,000 fee for H-1B visas widely used by the tech industry.
Alvaro Pereira, who is leaving his post after being named governor of Portugal's central bank, spoke to AFP as the Paris-based organisation released an updated outlook for the world economy.
The OECD said cuts in the US federal workforce and Trump's crackdown on immigration would also soften growth.
"There's obviously less labour growth and less labour growth means that obviously this will impact total GDP," Pereira told AFP.
He noted that the report was written before the new H-1B visa fee rule came into force over the weekend.
"We do think that continuing to attract high-skilled individuals from the United States or from around the world is a key strength of the US economy," Pereira said.
"This will only become exacerbated with the AI boom, because basically there's significant labour shortages in the ICT (information and communication technology) sector," he said.
H-1B visas allow companies to sponsor foreign workers with specialised skills - such as scientists, engineers and computer programmers-- to work in the US, initially for three years but extendable to six.
Such visas are widely used by the tech industry. Indian nationals account for nearly three-quarters of the permits allotted via lottery system each year.
The US and Germany are the two OECD countries with the highest labour shortage in the ICT sector, Pereira said.
