The global economy is demonstrating remarkable fortitude in the face of significant trade headwinds, according to a major new assessment from the Organisation for Economic Co-operation and Development (OECD). Despite former US President Donald Trump's sweeping tariff measures targeting allies and adversaries alike, world growth projections remain surprisingly robust.
Defying the Doomsayers
The OECD's latest Economic Outlook, published on Monday, presents a picture of an economic landscape that has absorbed the initial shock of aggressive protectionist policies. Global GDP growth is now forecast at 3.1% for both 2025 and 2026, unchanged from the organisation's previous estimate in June. This stability suggests underlying strengths are counterbalancing the disruptive effects of new trade barriers.
'The global economy has proven more resilient than we anticipated,' acknowledged OECD Chief Economist Clare Lombardelli. While warning that 'the full impact is still unfolding,' she noted that strong labour markets and adaptive business strategies have provided a crucial buffer.
A Transatlantic Tug-of-War
The report highlights a stark divergence between the world's two largest economies. The United States, the architect of the new tariff regime, is experiencing a noticeable slowdown. In contrast, China's growth forecast has been unexpectedly upgraded to 4.5% for 2025, up 0.2 percentage points, as it pivots to strengthen trade relationships elsewhere.
For the United Kingdom, the outlook is cautiously stable, with growth holding at 1.3% for 2026. However, the OECD issues a clear warning: the UK remains particularly vulnerable to any further escalation in global trade tensions, given its reliance on international commerce.
Key Factors Behind the Resilience
- Robust Employment: Tight labour markets across major economies are supporting consumer spending and confidence.
- Corporate Adaptation: Businesses are rapidly adjusting supply chains and sourcing strategies to mitigate tariff costs.
- Monetary Policy Shift: Falling inflation has allowed central banks to begin cutting interest rates, stimulating investment.
- Geographic Diversion: Trade is finding new routes, weakening the intended impact of bilateral tariffs.
The Looming Threats
Despite the positive surprise, the OECD cautions that the situation remains fragile. The report identifies several significant risks on the horizon:
- A potential retaliatory spiral if other nations respond with tariffs of their own.
- The inflationary impact of higher import costs eventually filtering through to consumers.
- A sharp slowdown in business investment due to ongoing uncertainty.
- Increased volatility in currency markets as trade flows shift.
The organisation's analysis concludes that while the global economy has shown impressive stamina, policymakers must remain vigilant. The continued stability of growth is not a given, but rather a testament to the dynamic adjustments being made by markets and governments worldwide. The coming months will be critical in determining whether this resilience is a temporary phenomenon or a new economic reality.
