New Approach to GDP Could Help Nature Survive Labour’s Housebuilding Plans

Economic

Summary:

Partha Dasgupta’s landmark study provided way to put a value on nature – but many fear report has been sidelined

Boris Johnson was prime minister and Kemi Badenoch was a Treasury minister when they gave their support to a groundbreaking study of the economy and its most consistently tortured victim: nature.

It was February 2021 and the eminent Cambridge professor Sir Partha Dasgupta had just delivered a 360-page report to the Treasury on the economics of biodiversity, which brought rigour to a subject often governed by emotion.

Johnson and Badenoch seemed to support the analysis, which argued that without financial cost/benefit analysis that included biodiversity in its sums, a growing economy would destroy natural habitats. Dasgupta’s hard-headed number crunching showed that when nature is in decline, there is a financial as well as an environmental deficit.

Fast forward to 2025, and Labour has promised to build 1.5m new homes by the end of the parliament and is already behind schedule. An expanding population and a reliance on private housebuilders, which drip feed homes into the market to maintain high prices, has left the UK with a significant shortage.

Last year there was an estimated shortfall of 2.5m homes, despite there being 1.4m plots already with planning permission. And while some local authorities have insisted that developers include parks and tree planting in their schemes, along with a high percentage of affordable homes, they complain that appeals by developers to the secretary of state for relief from these responsibilities are often successful.

But as the Labour government moves ahead with a planning and infrastructure bill designed to promote growth, there are understandable fears the landmark report has been sidelined. Nature loss in the UK has been significant over many decades, but Labour’s message in the bill is that the developer knows best, and other considerations can take a back seat.

It’s why the National Trust has warned the bill is a “licence to kill nature” and the Office for Environmental Protection has advised the government that it is a “regression” in environmental law. Housing projects that protect natural habitats, include public transport and divert wastewater from running into local watercourses are deemed too expensive. Current planning rules already allow developers, in almost all cases, to “value engineer” these elements out of the design.

Traditional economic thinking is partly to blame. It excludes the world’s natural resources except when they are dug up or chopped down and become raw materials for various manufacturing industries.

Dasgupta sought to change this, providing a way for economists to put a value on nature and calculate whether the type of growth in the economy enhanced or destroyed a broader definition of national wealth.

Since 2021, he has been liaising with the Office for National Statistics to produce an alternative to gross domestic product (GDP). Currently, when governments consider how much economic progress they have made in the previous year they use GDP, which adds up the income from buying and selling goods in the public and private sectors to give a measure of national output. This single figure is Rachel Reeves’s guiding light.

But the problem with it from an environmental perspective is that GDP includes lots of bad stuff, as well as what we might describe as progress. It calculates oil extraction in the North Sea without considering the implications for emissions and global heating, and classes peat extraction and the paving over of previously wooded land as adding to GDP without any negative cost.

Dasgupta’s report found that between 1990 and 2014, the UK’s “produced capital” (including manufactured goods and built infrastructure) rose by a fifth but, in the same period, its stock of “natural capital” declined by 30%.

Analysis by the Green Finance Institute charity suggests that the depletion of nature at the present rate will have the effect of cutting UK GDP by 6% by the 2030s, and, it has argued, if we want to get on and implement the Dasgupta review, replacing GDP must be top of the agenda.

Parliament’s environmental audit committee added its voice to complaints last month, saying it was concerned that a mission to protect 30% of the land by 2030 would be missed unless a mix of sticks and carrots persuaded private sector landlords to improve biodiversity net gain.

There are many MPs and ministers who recognise the need to protect nature and biodiversity as the UK grows both in population and economically. The question hangs over the chancellor as to whether she is on board.

Reeves recently waded into the controversy over a bat tunnel straddling the HS2 train link from London to Birmingham to say that never again should the protection of bats hold up important infrastructure projects. Keir Starmer vowed to take on “the nimbys” by reducing legal challenges to infrastructure building – with a new approach stopping “newts and bats” from blocking construction.

That could spell more trouble for the natural environment, not less.

Source: Theguardian

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Glendon

Economic

Forex

The US Bureau of Labor Statistics has released its latest JOLTs Job Openings data, revealing an increase in job vacancies across the country. The actual number of job openings, as defined by JOLTs, reached 7.391 million, surpassing both forecasted and previous numbers.

The reported number of 7.391 million job openings significantly outpaced the forecasted figure of 7.110 million. This substantial increase indicates a stronger job market than initially anticipated, suggesting a robust demand for labor and a vigorous US economy.

In comparison to the previous figure of 7.200 million, the actual number also marked an impressive rise. This upward trajectory in job openings signifies an expanding labor market, offering more employment opportunities for job seekers.

The JOLTs survey is a crucial indicator of the health of the US job market, measuring job vacancies and collecting data on employment, recruitment, hires, and separations from employers. A job is considered "open" according to JOLTs if a specific position exists, can start within 30 days, and there is active recruitment for workers from outside the establishment location.

The stronger than forecast reading of the JOLTs job openings is generally supportive for the USD, making it bullish. A robust job market often leads to increased consumer spending, which in turn, can boost the economy and strengthen the currency.

In contrast, a weaker than forecast reading could have been negative or bearish for the USD, indicating a sluggish job market and potentially dampening consumer spending and economic growth.

The latest JOLTs data, therefore, provides a positive outlook for the US economy and the USD, reflecting a robust labor market with increasing job opportunities. The continued growth in job openings could further bolster consumer spending and economic growth, strengthening the USD in the process.

Source: Investing

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Adam

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Economic

The U.S. dollar has steadied after a sharp tumble this year but traders in the foreign exchange options market are positioned for the U.S. currency to weaken further amid growing concern about the U.S. economy and persistent trade-related tensions.

Investors started the year expecting the Trump administration's policies to boost the dollar, helped by his tax cuts and safe haven demand stemming from protectionist policies.

But that view quickly soured when U.S. President Donald Trump unveiled levies in April that were larger and broader than anticipated, spiking volatility and sending the dollar to a three-year low.

While a temporary pause in some of the reciprocal tariffs has helped calm nerves, the options market still paints a dour outlook for the dollar.

The options market can offer a view on how investors and traders expect currencies to fare months down the line.

"FX option prices in general continue to point to a greater risk of further dollar weakening," said Tim Brooks, head of FX options at Optiver. "From our perspective there is no clear single large position, but relative to the past 5-10 years, we see unprecedented demand from investors to own USD puts in comparison with at-the-money options or USD calls."

Put options confer the right to sell the underlying security at a fixed price and date and are typically bought to express a bearish view. Their bullish counterpart is the call option, which grants the right to buy at a set price and known time frame.

Because the foreign exchange market quotes currencies in pairs like dollars per euro , and yen per dollar , a bullish position on the euro indicates a bearish view on the dollar.

FX risk reversals, a type of options strategy that involves the simultaneous purchase of a put option and sale of a call, or vice versa, are useful indicators of which currency is seeing more demand. Pricing on several of these currency pairs remains near multi-year highs despite the pause in the dollar's slide this year, highlighting the market's bearish stance on the buck.

According to LSEG data, the three-month , six-month , and one-year 25-delta EURUSD at-the-money risk reversal measures just edged off their highest level of bullishness for the euro against the dollar on records dating to 2007, apart from a brief interlude during the 2020 pandemic's market disruption.

FX options market positioned for further dollar weakness_1

Lin chart showing Investors see more upside potential for the euro than for the dollar, according to 25-delta EURUSD at-the-money risk reversals.

"Positioning remains extremely bearish on the dollar," Karl Schamotta, chief market strategist at Corpay, said.

"Pricing increases across the curve, with one-year risk reversals trading well above their shorter-term equivalents, suggest that options market participants expect the euro to continue its gradual grind higher," he said. The euro is up nearly 10% against the dollar this year.

DOLLAR BEARS AT PLAY

Other popular bets being placed are for the dollar to fall against the yen, Sagar Sambrani, senior FX options trader at Nomura, said.

Investors are building up positions in dollar puts, trades to sell the U.S. currency particularly against currencies like the euro and sterling, suggesting they remain convinced the greenback has more losses in store.

CME Group's options data show USD puts have drawn strong demand, both in aggregate and against most major currencies. In May, USD puts made up just over 59% of traded FX options volume, said Chris Povey, head of FX options at CME Group.

Demand for dollar puts over calls was especially apparent in the yen and the Australian dollar, Povey said, making up more than 65% of the options volume in those pairs.

Options data hint at expectations that the pace of decline in the dollar from here may be more measured relative to the sharp drop seen since the start of the year.

The dollar is down about 9% against the euro, and the yen, respectively, for the year. The euro was last at $1.1443, and the dollar was trading at 142.70 yen.

"Traders think spot market momentum will fade in the short term, but are betting on a gradual narrowing in relative growth differentials between the advanced economies by the autumn, along with a slow-motion diversification push over the next year, with major investors reallocating resources toward structurally undervalued markets outside the United States," Corpay's Schamotta said.

CONTRARIANS BEWARE

Investor confidence in the U.S. economy outperforming the rest of the world has taken a knock in recent months. Worries about rising U.S. debt and a widening budget deficit have also come to the fore, bolstering investors' desire to lighten up on U.S. assets.

"I don't think we have the conviction to fight this consensus," Jayati Bharadwaj, a global FX strategist at TD Securities.

"The new announcements that we have seen since the start of the year ... after a long time there are fundamental reasons to be bearish on the dollar," she said.

With trade policy in flux, the dollar could well experience modest relief rallies. It also has the great advantage of being the No. 1 central bank reserve currency, backed by the world's safest and most liquid government debt market, with higher interest rates than rival developed-economy currencies. But on balance, the path of least resistance for the dollar is lower, strategists and investors said.

"We've seen a significant amount of buying of dollar puts coming from a number of different types of clients," said an FX options trader at a large U.S. bank, who did not want to be named because of the private nature of these trades.

"We still want to have exposure to dollar weakness, because that's the trade that when you add up all the things that are going on in the world probably makes the most sense," the trader said.

source : reuters

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Warren Takunda

Economic

A "revenge tax" provision in Section 899 of the "One Big Beautiful Bill Act" is the latest headache facing global investors and the U.S. Dollar.

It would authorise the U.S. Treasury to impose up to a 20% tax on passive income - such as dividends, interest, and royalties - earned by foreign investors from countries identified as having "discriminatory" tax regimes against U.S. firms.

The tax is expected by analysts to accelerate the diversification of investment allocations away from the U.S., potentially exacerbating USD weakness.

"The White House provides many other reasons for the U.S. dollar to weaken, such as the risk of imminent taxes on U.S. investments and the generally erratic policies that make investing difficult," says Michael Pfister, FX strategist at Commerzbank.

Currency analysts argue that because the U.S. runs a significant trade deficit, it must continue to attract foreign investment in order to maintain the Dollar's value.

This tax proposal would obviously jeopardise foreign demand."The damage to the USD has been done and the funding of the dollar's two big holes - the budget and the current account - is now emerging as a market driver," says George Saravelos, head of FX analysis at Deutsche Bank.

Trump's "Revenge Tax" a Major Dollar Headwind_1

Above: The Dollar index, a measure of broader USD performance.

"The U.S. in a precarious position to fund its deficits, which relies on the kindness of strangers," says Mark McCormick, analyst at TD Securities.

The ambiguity surrounding the scope of Section 899, particularly whether it applies to holdings like U.S. Treasury bonds, has unsettled financial markets. Analysts warn that taxing foreign-held U.S. Treasuries could diminish demand.

"A sharp slowdown in US inflows appears to be materialising," says Saravelos.

The post-WWII order allowed the U.S. government "to sell a slew of Treasury bonds to foreign investors, and the dollar to assume the position of dominant currency," explains Goldman Sachs. But, "re-making that order has the potential to erode these advantages."

Trump's "Revenge Tax" a Major Dollar Headwind_2

Above: GBP/USD at daily intervals, with the annotations made in our latest Week Ahead Forecast.

The Dollar reached its highest levels since 2002 in 2024 as foreign investors sucked up U.S. bonds, stocks and other assets as the economy's strong growth promised outsized returns.

Although 2024 represented a peak, the U.S. exceptionalism trade started to build momentum in the mid-2010s as the U.S. economy refashioned itself following 2008's financial crisis, testament to its unrelenting dynamism.

The foreign investor tax adds to a growing list of concerns that end the exceptionalism trade, with tariffs being the chief focus up until now.

"We expect President Trump’s erratic policymaking is set to increase the number of 'Sell America' days," wrote Mansoor Mohi-uddin, Chief Economist at the Bank of Singapore. "That keeps us cautious on long-term Treasuries and the U.S. dollar."

Trump's "Revenge Tax" a Major Dollar Headwind_3

Above: EUR/USD at daily intervals with the annotations made in our latest Euro-Dollar Week Ahead Forecast call.

An extension of the 2017 Tax Cuts and Jobs Act (TCJA) - a key component of the One Big Beautiful Bill Act - will cost $3.3 trillion over the next decade and $5.2 trillion if the package is made permanent, according to the Committee for a Responsible Federal Budget.

"The impact is also less sudden and dramatic, leaving more scope for this to play out over a longer period of time. The fiscal largesse points to upside risks to US long-term interest rates, which could eventually prove to be a headwind for both the economy and financial markets," says Rogier Quaedvlieg, an economist at ABN AMRO Bank N.V.

The One Big Beautiful Bill Act is expected to be signed into law by the President on July 04.

Source: Poundsterlinglive

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Michelle

Economic

Forex

The currency markets remain largely listless today, with all major pairs and crosses still trapped within last week’s ranges. Euro edged slightly lower following the release of Eurozone CPI data, which showed inflation falling below the ECB’s 2% target for the first time since September last year. The core measure also softened notably, reinforcing the view that disinflationary pressures—particularly within services—are well entrenched. With inflation now comfortably back within target, markets have little doubt that ECB will proceed with a 25bps rate cut this Thursday.

Uncertainty over tariffs continues to hover as a key wildcard. With little clarity on whether the US will escalate its trade actions further, markets are reluctant to commit. A July pause from ECB remains the base case, but further action could hinge on whether tariffs ultimately push inflation up through cost channels—or suppress demand and contribute to disinflation. This dilemma is front and center as policymakers navigate crosscurrents in growth and prices.

Adding to the cautious mood, the OECD revised its global growth forecasts downward. It now sees world GDP expanding just 2.9% in both 2025 and 2026, citing increased trade barriers and lingering policy uncertainty as key drags. OECD Secretary General Mathias Cormann warned that a further 10 percentage point hike in US bilateral tariffs could shave 0.3% off global output over two years, while likely adding to inflation in affected countries.

Technically, AUD/JPY continues to press 38.2% retracement of 86.03 to 95.63 at 91.96. Firm break of this fibonacci level will extend the correction from 95.63 to 100% projection of 95.63 to 91.64 from 93.85 at 89.86. Nevertheless, strong bounce from current level, followed by break of 93.85 resistance, will argue that rise from 86.03 is ready to resume through 95.63.

In Europe, at the time of writing, FTSE is up 0.17%. DAX is up 0.16%. CAC is down -0.15%. UK 10-year yield is down -0.038 at 4.632. Germany 10-year yield is down -0.019 at 2.51. Earlier in Asia, Nikkei fell -0.06%. Hong Kong HSI rose 1.53%. China Shanghai SSE rose 0.43%. Singapore Strait times rose 0.10%. Japan 10-year JGB yield fell -0.27 to 1.482.

BoE’s Bailey: Rate path still downward, but clouded by unpredictability

BoE Governor Andrew Bailey told the Treasury Committee today that while the direction for interest rates remains downward, the outlook has become increasingly uncertain.

Declining to pre-commit to a vote at the upcoming June meeting, Bailey said, “the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty.”

He emphasized the role of external forces, noting that the Bank has revised its language to reflect the “unpredictable” nature of the current global environment.

His comments were echoed by fellow policymakers Catherine Mann and Sarah Breeden, who both acknowledged that rates are likely headed lower but stressed the difficulty in forecasting the exact pace or scale of future cuts.

Mann warned against assuming a fixed glide path, while Breeden said “there is uncertainty about how far, how fast.”

Eurozone CPI falls to 1.9%, below ECB target for first time since Sep 2024

Eurozone inflation dipped back below the ECB’s 2% target for the first time since September 2024. Headline CPI fell from 2.2% yoy to 1.9% yoy in May, undershooting expectations of 2.0%. Core CPI (ex-energy, food, alcohol & tobacco) also eased more than forecast to 2.3% from 2.7%.

The disinflation was led by a sharp slowdown in services inflation, which dropped from 4.0% yoy to 3.2% yoy. Non-energy industrial goods remained unchanged at 0.6% yoy. Energy prices continued to contract at -3.6% yoy, reinforcing the broader downward pressure. Despite a slight uptick in food and alcohol inflation to 3.3% yoy, the overall picture confirms easing price momentum across key sectors.

Swiss CPI falls to -0.1% yoy, first negative since 2021

Swiss consumer inflation turned negative in May for the first time since March 2021, with headline CPI falling -0.1% yoy, down from 0.0% in April yoy. Core inflation, which strips out volatile components such as fresh food and energy, slipped to 0.5% yoy from 0.6% yoy previously.

On a monthly basis, both headline and core CPI rose 0.1%, in line with expectations.

The breakdown reveals that domestic product prices grew just 0.2% mom and decelerated to from 0.8% yoy to 0.6% yoy. Imported goods prices were flat on the month and fell -2.4% yoy, ticked up from -2.5% yoy.

BoJ’s Ueda: Ready to hike if wage growth recovers from tariff drag

BoJ Governor Kazuo Ueda told parliament today that recently imposed U.S. tariffs could weigh on Japanese corporate sentiment, potentially impacting winter bonus payments and next year’s wage negotiations.

He acknowledged that wage growth may “slow somewhat” in the near term due to these external pressures. However, Ueda expressed confidence that wage momentum would eventually “re-accelerate”, helping to sustain a moderate growth in household consumption.

Looking ahead, Ueda reiterated the BoJ’s readiness to adjust its ultra-loose policy if the economy evolves in line with its projections. “If we’re convinced our forecast will materialize, we will adjust the degree of monetary support by raising interest rates,” he said.

However, he cautioned that uncertainty surrounding the economic outlook remains “extremely high.”

RBA’s Hunter: AUD’s recent resilience linked to global shift away from USD exposure

RBA Chief Economist Sarah Hunter addressed the unusual behavior of the Australian Dollar in recent months in a speech today. She highlighted that while initial moves were consistent with past risk-off episodes, the currency’s subsequent rebound against the US Dollar stood out as “more unusual”.

On a “trade-weighted” basis, AUD has remained broadly stable, even though it has appreciated against the greenback and the Chinese renminbi, while weakening against most other major currencies.

This divergence, Hunter explained, stems from “offsetting factors”. Global growth concerns have pressured the AUD against safe-haven and cyclical peers, while simultaneous outflows from US assets have weakened the US Dollar.

Hunter cautioned that it’s too soon to tell whether this trend will persist, but acknowledged that recent market behavior reflects shifting investor sentiment, particularly toward capital reallocation away from US assets. As a result, Australian Dollar’s relative resilience against USD may be underpinned by portfolio rebalancing and perceived relative economic stability.

Hunter noted that the trade-weighted index has reverted to “pre-shock values”, suggesting minimal net change in the foreign-currency value of Australian exports. However, the “relative move of capital” into Australia, at a time when the US is facing policy and tariff-related volatility, could offer some support to “domestic investment activity”, providing a cushion to the broader economy amid global uncertainties.

RBA Minutes: 25bps cut chosen for caution and predictability after debating hold and 50bps options

RBA’s May 20 meeting minutes revealed that policymakers weighed three policy options—holding rates, a 25bps cut, or a larger 50bps reduction—before ultimately opting for a modest 25bps cut to 3.85%.

The case for easing hinged on three key factors: sustained progress in bringing inflation back toward target without upside surprises, weakening global conditions and household consumption, and the view that a cut would be the “path of least regret” given the risk distribution.

While members discussed a 50bps reduction after deciding to ease, they found the case for a larger move unconvincing. Australian data at the time showed little evidence that trade-related global uncertainty was materially harming domestic activity. Furthermore, some scenarios might even result in upward pressure on inflation, prompting caution. The Board also assessed that it was “not yet time to move monetary policy to an expansionary stance”.

Ultimately, the Board judged that to move “cautiously and predictably” was more appropriate.

Caixin PMI manufacturing drops to 48.3, as China faces marked weakening at start of Q2

China’s manufacturing sector unexpectedly shrank in May, with Caixin PMI falling to 48.3 from 50.4, well below market expectations of 50.6. This marked the first contraction in eight months and the lowest reading since September 2022.

According to Caixin Insight’s Wang Zhe, both supply and demand weakened, with a particularly notable drag from overseas demand. Employment continued to contract, pricing pressures remained subdued, and logistics saw moderate delays. Although business optimism saw a marginal recovery, the broader picture points to intensifying headwinds.

The report highlights the fragile start to Q2, with Wang pointing to a “marked weakening” in key economic indicators and a “significantly intensified” level of downward pressure.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1377; (P) 1.1413; (R1) 1.1480; More…

Intraday bias in EUR/USD is turned neutral with current retreat. Rebound from 1.1064 could extend higher, but strong resistance should be seen from 1.1572 to limit upside, at least on first attempt. On the downside, break of 1.1209 support will indicate that the corrective pattern from 1.1572 has started the third leg, and target 1.1064 support.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0856) holds.

Source: ACTIONFOREX

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Adam

Commodity

Crude Oil Holds Above Key Support as Geopolitical Risk and Weaker Dollar Lend Strength

Light crude oil futures ticked higher in early Tuesday trade, stabilizing above their 50-day moving average after a strong start to the week. Monday’s rally saw prices spike nearly 3% before easing off highs at $63.88, falling just short of recent resistance levels. The market’s ability to stay above its 50-day average remains a key technical marker, with traders eyeing the 200-day moving average at $66.57 as the next upside target.

OPEC+ Production Steady, Market Reacts Favorably

Oil’s early-week strength was largely driven by OPEC+ holding firm on its output hike of 411,000 barrels per day for July. This decision came as a relief to traders who had braced for a potentially larger increase. With supply additions remaining limited, traders perceived the group’s stance as supportive for prices in the near term.

Russia-Ukraine Escalation and Iran Talks Cloud Supply Outlook

Geopolitical concerns are once again playing into oil markets. Over the weekend, Ukraine launched one of its largest drone offensives on Russian targets, including a strike on a key highway bridge and bombers deep inside Siberia. These developments have revived risk premiums across energy markets.

At the same time, Iran is expected to reject a U.S. nuclear deal proposal, which would likely extend sanctions on Iranian oil exports. As one Iranian diplomat stated, the offer fails to meet Tehran’s demands regarding uranium enrichment and sanctions relief. Traders now see limited risk of near-term increases in Iranian crude supply, tightening global balances further.

U.S. Dollar Weakness Adds Tailwind to Crude Oil Prices

A weaker U.S. dollar is also lending support to crude prices. The dollar index is trading near six-week lows as investors assess the potential economic fallout from the Trump administration’s tariff policy. For oil traders, a softer dollar makes crude more affordable for foreign buyers, boosting demand.

Canadian Wildfires Add to Supply Pressures

In North America, wildfires in Alberta have disrupted roughly 344,000 barrels per day of oil sands output—roughly 7% of Canada’s total crude production. This unplanned supply loss is yet another bullish factor for prices, especially if U.S. crude inventory data later this week shows a drawdown.

Oil Prices Forecast: Bullish Near-Term Outlook Holds

Daily Light Crude Oil Futures

With geopolitical tensions high, OPEC+ maintaining moderate output increases, and the dollar under pressure, the bullish case for oil remains intact. As long as light crude holds above its 50-day moving average, traders will likely test higher levels, with the 200-day average at $66.57 now in sight.

Source: fxempire

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Warren Takunda

Economic

China–U.S. Trade War

U.S. economic growth will slow to 1.6% this year from 2.8% last year as President Donald Trump’s erratic trade wars disrupt global commerce, drive up costs and leave businesses and consumers paralyzed by uncertainty.

The Organization for Economic Cooperation and Development forecast Tuesday that the U.S. economy — the world’s largest — will slow further to just 1.5% in 2026. Trump’s policies have raised average U.S. tariff rates from around 2.5% when he returned to the White House to 15.4%, highest since 1938, according to the OECD. Tariffs raise costs for consumers and American manufacturers that rely on imported raw materials and components.

World economic growth will slow to just 2.9% this year and stay there in 2026, according to the OECD’s forecast. It marks a substantial deceleration from growth of 3.3% global growth last year and 3.4% in 2023.

The world economy has proven remarkably resilient in recent years, continuing to expand steadily — though unspectacularly — in the face of global shocks such as the COVID-19 pandemic and Russia’s invasion of Ukraine.

But global trade and the economic outlook have been clouded by Trump’s sweeping taxes on imports, the unpredictable way he’s rolled them out and the threat of retaliation from other countries.

Reversing decades of U.S. policy in favor of freer world trade, Trump has levied 10% taxes — tariffs — on imports from almost every country on earth along with specific duties on steel, aluminum and autos. He’s also threatened more import taxes, including a doubling of his tariffs on steel and aluminum to 50%.

Without mentioning Trump by name, OECD chief economist Álvaro Pereira wrote in a commentary that accompanied the forecast that “we have seen a significant increase in trade barriers as well as in economic and trade policy uncertainty. This sharp rise in uncertainty has negatively impacted business and consumer confidence and is set to hold back trade and investment.’'

Adding to the uncertainty over Trump’s trade wars: A federal court in New York last week blocked most of Trump’s tariffs, ruling that he’d overstepped his authority in imposing them. Then an appeals court allowed the Trump administration to continue collecting the taxes while appeals worked their way through the U.S. courts.

China — the world’s second-biggest economy — is forecast to see growth decelerate from 5% last year to 4.7% in 2025 and 4.3% in 2026. Chinese exporters will be hurt by Trump’s tariffs, hobbling an economy already weakened by the collapse of the nation’s real estate market. Some of the damage will be offset by help from the government: Beijing last month outlined plans to cut interest rates and encourage bank lending as well as allocating more money for factory upgrades and elder care, among other things.

The 20 countries that share the euro currency will collectively see economic growth pick up from 0.8% last year to 1% in 2025 and 1.2% next year, the OECD said, helped by interest rate cuts from the European Central Bank.

The Paris-based OECD, comprising 38 member countries, works to promote international trade and prosperity and issues periodic reports and analyses.