OECD Predicts 2026 as Year of Full Tariff Impact Under Trump Policies

The Organization for Economic Cooperation and Development (OECD) states that the effects of the tariffs imposed by President Trump will be fully reflected with the entry of the new year, although not all of them will be negative. The OECD maintains forecasts for G20 countries upward.

“The full effects of tariff increases have not yet been felt (many changes are being implemented gradually and firms initially absorb some tariff increases through margins), but they are becoming increasingly visible in spending choices, labor markets, and consumer prices,“ OECD analysts note.

U.S. bilateral tariffs have increased in almost all countries since May, with the country’s overall effective tariff rising the most, to 19.5% at the end of August, the highest level since 1933.

The United States will lower its annual GDP from 2.8% in 2024 to 1.5% in 2026

The OECD warns against the emergence of “signs of softening in labor markets, with unemployment rates rising and a decline in job vacancies as a percentage of the unemployed in some economies, including the United States.“

The organization projects global GDP growth to decline from 3.3% in 2024, to 3.2% in 2025 and 2.9% in 2026, as front-loading of payments ceases and higher tariff rates and still-high political uncertainty dampen investment and trade.

Moreover, annual GDP growth in the United States is projected to decline from 2.8% in 2024 to 1.8% in the current fiscal year and to 1.5% in 2026, as strong investment growth in high-tech sectors is more than offset by higher tariffs and declining net immigration.

The OECD expects Eurozone GDP growth to be 1.2% in 2025 and 1% in 2026, with rising trade frictions and geopolitical uncertainty partly offset by more favorable credit conditions.

U.S. redistributes output to China as OECD projects improvements in G20 economy

However, according to the OECD, advanced and emerging economies are going against the tide, with financial market conditions improving. Inflation is projected to decline in most G20 economies as growth moderates along with labor market pressures from 3.4% in 2025 to 2.9% in 2026, while core inflation in those advanced economies is projected to decline from 3.4% in 2025 to 2.9% in 2026, while core inflation in those advanced economies is projected to decline from 3.4% in 2025 to 2.9% in 2026.underlying inflation in these advanced economies will remain broadly stable, from 2.6% in 2025 to 2.5% in 2026.

In the United States, the country’s fashion giants began to decouple from sourcing in China, the world’s largest textile manufacturer. So far this year, U.S. fashion has taken 20% of the production it produced in the country a year ago from the Asian giant, in an attempt to reduce the impact on its accounts of the tariff changes introduced by Donald Trump. Nike, Gap and Abercrombie & Fitch are just some of the companies, from an increasingly extensive list of US companies that have warned of the punishment that the trade war initiated by the president of the country will have on their businesses.