The effects of the Trump administration’s tariffs and policy uncertainty could lead to rising inflation and slowing gross domestic product (GDP) growth, warned the Organization for Economic Cooperation and Development (OECD) in its quarterly report.
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The OECD estimates that the average U.S. tariff rate was 19.5% at the end of August, registering the highest level since 1933. It also expects inflation to average 3% in 2026, up from its estimate of 2.7% for 2025.
“The impacts of higher tariff rates are yet to be fully felt in the U.S. economy,” said the organization.
OECD Warns of Cooling Growth and Shaky Labor Market
After growing by 2.4% in 2024, the OECD expects GDP growth to drop sharply to 1.8% in 2025 and then 1.5% in 2026. That comes with a weakening labor market, which the OECD attributes to lower net immigration and a smaller government workforce.
The Fed has acknowledged a slowing labor market, with the OECD predicting one more rate cut in 2025 and two more in early 2026.
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