Tariffs hit global economic growth as OECD warns of crypto-related financial stability risks
Make us a preferred source
Make us a preferred source on Google
The news: The Organisation for Economic Co-operation and Development (OECD) has urged governments to find ways to engage cooperatively on global trade and work to make trade policy more predictable amid an interim economic outlook that warns the full effects of US tariffs is yet to be felt.
Global GDP growth is tipped to decrease from 3.3% in 2024 to 3.2% in 2025 and 2.9% in 2026.
While the global economy has seen more resilient growth in the first half of 2025 than expected, the OECD notes this is due to strong AI-related outcomes in the US and fiscal support in China outweighing trade headwinds.
"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," the OECD report said.
"High and volatile crypto-asset valuations also raise financial stability risks given growing interconnectedness with the traditional financial system," it said.
"On the upside, reductions in trade restrictions or faster development and adoption of artificial intelligence technologies could strengthen growth prospects."
The numbers: Australia’s growth outlook has remained unchanged, with the interim projections confirming an expected economic growth rate of 1.8% in 2025 and 2.2% in 2025.
Headline inflation was increased slightly with the OECD now thinking it will be 0.2 percentage points higher in 2025 than its last estimates, at 2.5%, and 0.1 percentage points higher in 2026, at 2.4%.
Core inflation is expected to be at 2.7% for 2025 an 2.5% in 2026, both 0.2 percentage points higher than previously estimated.
Globally, the impact of tariff is starting to take shape. The OECD notes the overall effective US tariff rate rose to 19.5% at the end of August. This is the highest it has been since 1933.
In the US, annual GDP growth is now projected to drop from 2.8% in 2024 to 1.8% in 2025 and 1.5% in 2026 “as strong investment growth in high technology sectors is more than offset by higher tariff rates and a drop in net immigration”.
China’s economic growth is forecast to reach 4.9% in 2025 and 4.4% in 2026.
What they said: "This OECD report makes it really clear that uncertainty and volatility around the world are continuing to weigh on the global economic outlook," Treasurer Jim Chalmers said in a statement.
"The OECD thinks there are still significant downside risks to the global economic outlook as inflation lingers around the world, growth slows, and the effects of tariffs are still flowing through," he said.
"We’re continuing to make welcome progress, but there’s more to do because Australians are still under pressure, the global economy is uncertain, and our economy needs to be more resilient and productive."
The OECD encouraged fiscal policymakers to ensure fiscal discipline to safeguard longer-term debt sustainability and space to react to future shocks. And it suggested governments consider “shifting tax systems over time towards less-distortive taxes with fewer exemptions”.
And it asked monetary policymakers to “remain vigilant”. The report included a pointed referenced to the ability of policymakers to react quickly and credibly behind “enhanced by central bank independence, both legal and operational, and accountability”.
The sources: OECD Economic Outlook Interim Report, Treasurer media statement
