With President Donald Trump’s “reciprocal” tariffs hitting more than 90 U.S. trading partners, the overall average American duty rate rose to about 19.5 percent in August, the highest seen since 1933.
The administration’s trade strategy is having ripple effects worldwide; it’s a drag on gross domestic product (GDP) growth in countries around the world, and an even greater weight on the United States’ GDP.
International GDP is set to decrease in this year as compared to 2024, and that slowdown will extend into the following 12-month period, according to the Organisation for Econonomic Development (OECD). The intergovernmental organization with 38 member countries released its interim report this week, showing that global GDP will decrease from 3.3. percent last year to 3.2 percent this year—and stands to fall to 2.9 percent in 2026.
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The United States, which inflicted punishing duties on many of its trade partners this year, stands to see its GDP growth fall even further, from 2.8 percent in 2024 to 1.8 percent in 2025 and 1.5 percent in 2026. OECD attributed much of that loss to the heightened tariff rates, along with a contraction in net immigration.
The falling value of America’s goods and services this year will stand in contrast to global growth, which was “more resilient than anticipated” during the first half of 2025. Emerging market economies saw some buoyancy likely because trade was bolstered by a front-loading of orders by American companies. China, once the singular target of Trump’s tariff campaign, is expected to see 4.9 percent GDP growth this year and a softer rate of 4.4 percent in 2026 as the front-loading phenomenon subsides and the true impacts of higher duties are realized.
“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 margins—but are becoming increasingly visible in spending choices, labour [sic] markets and consumer prices,” OECD analysts wrote.
The most evident signs of softening are showing themselves now through the labor market, with unemployment rates rising and job openings falling in certain markets—including the U.S.
What’s more, a resurgence of goods inflation has food prices rising along with the MSRPs of other products.
A recently released study from Duke University and the Federal Reserve Banks of Richmond and Atlanta showed that tariffs remain the most pressing of firms’ concerns in the U.S., with chief financial officers across sectors attributing around one-third of their companies’ price increases to the changes in trade policy. Those same CFOs said tariffs will be responsible for about one-quarter of price hikes in 2026 as well.
According to OECD, though, advanced and emerging-market economies are bucking the trend, with financial market conditions already easing. And inflation is expected to decline in most of the G20 economies as growth moderates along with labor market pressures. Headline inflation, which includes a range of goods as well as expenditures like food and energy, is projected to fall from 3.4 percent in 2025 to 2.9 percent in 2026 in G20 economies, while core inflation (which excludes food and energy, which are often volatile in pricing), will hold steady at 2.6 percent this year, dropping slightly to 2.5 percent in 2026.
However, “Significant risks to the economic outlook remain,” analysts wrote. “Further increases in bilateral tariff rates, a resurgence of inflationary pressures, increased concern about fiscal risks, or substantial risk repricing in financial markets could all lower economic growth relative to the baseline.”
Bright spots for growth could include potential drawdowns in trade restrictions (Trump’s tariffs are being challenged in the Supreme Court, with hearings set for early November, and trade negotiations with a number of nations are ongoing), along with quicker development and adoption of AI technologies, the group said.
But in order to pull back from the brink of lingering widespread inflation and GDP stagnation or backsliding, “Countries need to find ways of engaging co-operatively within the global trading system and working together to make trade policy more transparent and predictable while addressing economic security concerns.”
