OECD Warns of Global Fragility: Report Projects Slowing Global Growth Despite Resilience, Cites High Tariffs and AI Risks
London-UK, December 12, 2025
OECD Warns of Global Fragility: A Resilience Tempered by Trade Risks
The Organisation for Economic Co-operation and Development (OECD) has issued a sobering OECD Warns of Global Fragility in its latest Economic Outlook report, forecasting a moderate deceleration in the world economy over the next two years.
While the report acknowledges the Resilience shown by major economies in 2025, buoyed by supportive macroeconomic policies and a surge in AI-related investment, it projects Slowing Global Growth from 3.2% in 2025 to 2.9% in 2026.
The major risks cited by the OECD include the increasing use of High Tariffs as geopolitical tools and the mounting, though undefined, dangers posed by the rapid adoption of Artificial Intelligence (AI).
The report paints a complex picture where the risk factors are shifting away from traditional threats like inflation and toward policy-driven uncertainty.
OECD Secretary-General Mathias Cormann specifically flagged mounting risks from the proliferation of High Tariffs, which are becoming increasingly visible in business costs and consumer prices, particularly in the United States and, as evidenced by Mexico’s recent move, in its trade partners.
Furthermore, the report highlights the geopolitical competition, the ongoing race for energy security, and rising global debt levels as key contributors to a state of global fragility that remains near a record high, affecting one-quarter of the world’s population who live in contexts of high or extreme fragility.
Headlines Points
Growth Deceleration:
The OECD Warns of Global Fragility as it projects Slowing Global Growth to 2.9% in 2026, down from 3.2% in 2025.
New Risks Cited:
The report specifically Cites High Tariffs and the uncertainty surrounding the rapid adoption of AI Risks as the most significant new threats to stability.
Call for Discipline:
The OECD urged governments to restore fiscal discipline to address mounting public debt, especially given rising defence costs and ageing populations.
Trade Tension Focus:
Global trade growth has cooled, and the proliferation of tariffs is leading to increased business costs and consumer prices worldwide.
Investment Boost:
The current Resilience is partly attributed to easier financial conditions and investment in AI-related technologies, which have propped up demand.
The Tariff Trap and Fiscal Discipline
The OECD’s focus on High Tariffs signals a deep concern that trade protectionism is undoing years of global economic integration and efficiency gains.
The increasing weaponization of trade policy—manifested in duties imposed by the US, the EU, and now Mexico on Asian imports—is disrupting supply chains, increasing uncertainty, and leading to higher inflation for consumers.
The report explicitly calls for countries to lower trade tensions and policy uncertainty, arguing that restoring open and predictable trade rules is crucial for supporting long-term global growth.
Simultaneously, the report issued a stern warning about the state of global public finances. Governments are urged to urgently restore fiscal discipline in the face of persistently high public debt.
The costs associated with an ageing population, coupled with increased defence spending driven by geopolitical tensions, mean that governments must find smart ways to consolidate budgets.
This includes containing and reallocating spending, improving public-sector efficiency, and optimizing revenues, while crucially maintaining support for the most vulnerable in society.
The Unknown of AI Risks
The Economic Outlook is notable for formally identifying the AI Risks as a significant source of future fragility. While investment in AI-related technologies has provided a short-term boost to demand, the OECD warns that the long-term impact is highly uncertain.
The potential for job displacement, widening inequality, and a failure of AI investments to deliver expected returns—an “AI-bubble” scenario—leaves markets vulnerable.
This uncertainty is compounded by stretched asset valuations, particularly in tech stocks, which could face a sharp correction if the growth or returns from AI disappoint.
In summation, the OECD report is a call to action: the world economy is demonstrating resilience today due to fiscal and technological tailwinds, but this strength is fragile and temporary.
The major challenges of Slowing Global Growth, high public debt, and the self-inflicted wounds of High Tariffs require immediate policy intervention. Structural reforms that cut red tape and promote competition, alongside a commitment to lowering trade barriers, are the only path to achieving durable, sustainable economic expansion into the later half of the decade.
