The Organisation for Economic Co-operation and Development (OECD) has warned that global growth could face new risks from trade tensions and investor optimism around artificial intelligence (AI). The Paris-based organisation said global growth is holding up better than expected, thanks in part to a surge in AI investment, which is helping to offset the impact of US tariff hikes. In its latest Economic Outlook, the OECD predicted that global growth will slow slightly from 3.2 percent in 2025 to 2.9 percent in 2026. The organisation expects a rebound to 3.1 percent in 2027, leaving its growth forecasts unchanged from September. OECD Secretary-General Mathias Cormann said the US tariffs have so far had only a limited impact, but warned that costs are likely to rise as companies use up inventories built up earlier this year. “The full effects of those higher tariffs will become clearer as firms run down the inventories that they built up,” Cormann said. The US economy is expected to grow 2 percent in 2025, up from a previous forecast of 1.8 percent, before slowing to 1.7 percent in 2026. AI investment, fiscal support, and potential Federal Reserve rate cuts are helping offset the effects of tariffs, reduced immigration, and federal job cuts. However, the OECD cautioned that US fiscal policy is on an unsustainable path, with large budget deficits and rising debt that will require significant adjustments in coming years. Global trade growth is projected to slow from 4.2 percent in 2025 to 2.3 percent in 2026 as tariffs affect investment and consumption. Elevated trade policy uncertainty is limiting prospects for a full recovery. China’s growth is expected to remain at 5 percent in 2025, slightly above September’s 4.9 percent forecast, before easing to 4.4 percent in 2026 as fiscal support fades and US tariffs take effect. The eurozone’s 2025 growth forecast has been revised up to 1.3 percent from 1.2 percent, supported by resilient labour markets and increased public spending in Germany. Growth is expected to moderate to 1.2 percent in 2026, as budget tightening in France and Italy weighs on the outlook. Japan’s economy is projected to grow 1.3 percent in 2025, up from 1.1 percent, buoyed by strong corporate earnings and investment, before slowing to 0.9 percent in 2026. Inflation is expected to gradually return to central bank targets by mid-2027 in most major economies. In the US, inflation may peak in mid-2026 due to tariff effects before easing. In China and some emerging markets, inflation is likely to rise modestly as excess production capacity declines. Most major central banks are expected to maintain or reduce borrowing costs over the next year as inflation pressures ease. The US Federal Reserve may cut rates slightly by the end of 2026, unless tariff-related inflation surprises occur. The OECD highlighted that while AI investment is supporting growth, overly high expectations could trigger a stock market correction if projected returns fail to materialize. Policymakers and investors alike are being urged to remain cautious amid trade uncertainties and rapid technological shifts. Overall, the OECD’s report suggests that the global economy remains resilient for now, but ongoing risks from tariffs and AI-related speculation could challenge growth in the near future.