01:01 PM EDT, 06/03/2025 (MT Newswires) -- The Organization for Economic Co-operation and Development, or OECD, on Tuesday lowered its global and US economic growth projections for 2025 and 2026 amid significant trade barriers, elevated policy uncertainty and deteriorating confidence.

The organization now expects world real gross domestic product growth to slow down to 2.9% each in 2025 and 2026 from last year's estimated 3.3% gain. In March, it projected growth at 3.1% this year and 3% for the next. The latest outlook assumes that tariff rates as of mid-May remain intact despite ongoing legal challenges, the OECD said in its latest report.

"Weakened economic prospects will be felt around the world, with almost no exception," OECD Chief Economist Alvaro Pereira said. "Lower growth and less trade will hit incomes and slow job growth."

In the US, GDP growth is now expected to be 1.6% in 2025 and 1.5% in 2026, compared with previous expectations for 2.2% this year and 1.6% the next. "This reflects the substantial increase in the effective tariff rate on imports and retaliation from some trading partners, high economic policy uncertainty, a significant slowdown in net immigration, and a sizeable reduction in the federal workforce," the OECD said.

Global trade tensions were recently renewed after China's Ministry of Commerce accused the US of violating a preliminary deal reached between the two countries last month. President Donald Trump last week said that China violated the pact, under which Washington and Beijing agreed to suspend most tariffs on each other's imports for 90 days.

Recently, the US Court of International Trade ruled that Trump overstepped his authority by imposing duties under the International Emergency Economic Powers Act. A federal appeals court temporarily paused that ruling.

GDP growth in China is now estimated at 4.7% and 4.3% in 2025 and 2026, respectively, down from the OECD's March forecast of 4.8% and 4.4%, it said Tuesday.

The organization expects inflation to drop to central banks' targets by 2026 in most countries, though it will now take longer to reach the set objectives. In the countries more impacted by tariffs, inflation might even go up first before easing, according to the report.

"There is the risk that protectionism and trade policy uncertainty will increase even further and that additional trade barriers might be introduced," Pereira said. "According to our simulations, additional tariffs would further reduce global growth prospects and fuel inflation, dampening global growth even more."

Last month, the Organization of the Petroleum Exporting Countries reduced its 2025 world and US economic growth forecasts.