OECD Warns AI and Tariffs Will Test the Global Economy

The global economy is proving more resilient than many expected, with growth of 3.2% in 2025 underpinned by a surge in artificial intelligence investment that is offsetting the drag from rising US tariffs. 

That support, however, looks temporary. The OECD now expects global growth to ease to 2.9% in 2026 before stabilising around 3.1% in 2027, as trade frictions, slower consumption, and weaker investment begin to bite.

The US outlook has brightened slightly on paper, with 2025 growth revised up to 2.0% from 1.8%, but momentum is forecast to slow to 1.7% in 2026. Fiscal stimulus, AI-led capex and the prospect of modest Federal Reserve rate cuts are cushioning the economy, yet widening budget deficits and rising federal debt have pushed US fiscal policy onto an increasingly fragile footing. 

What Does This Mean for Me?

China’s economy is expected to expand by 5.0% in 2025 before easing to 4.4% in 2026. The eurozone is showing tentative improvement, with 2025 growth nudged up to 1.3%, driven by resilient labour markets, before moderating slightly in 2026 as fiscal tightening in France and Italy takes hold. Japan is forecast to grow 1.3% in 2025 before slowing to 0.9% a year later.

Global trade growth is expected to cool sharply from 4.2% in 2025 to 2.3% in 2026 as tariff uncertainty curbs cross-border demand. Most major central banks are expected to hold or gently cut rates over the next 12–18 months as inflation drifts back toward target.