The world economy will grow more than previously forecast this year after absorbing the shock of US President Donald Trump’s tariffs, but their full impact remains uncertain, the OECD said Tuesday.In June, the Paris-based organisation had cut its forecast from 3.1 percent to 2.9 percent, warning at the time that Trump’s tariffs would stifle the world economy.But in an updated outlook on Tuesday, it raised the projection to 3.2 percent, saying the economy “proved more resilient than anticipated” in the first half of 2025.”The impact of tariffs is taking longer to reach the economy,” OECD chief economist Alvaro Pereira told AFP in an interview.The OECD report said “front-loading” — companies rushing to import goods ahead of Trump’s tariffs — “was an important source of support”.The economy also got a boost from strong AI-related investments in the United States and government spending in China.The updated figure is still a slight slowdown from 3.3 percent in 2024.”The full effects of tariff increases have yet to be felt — with many changes being phased in over time and companies initially absorbing some tariff increases through (profit) margins,” the Organisation for Economic Co-operation and Development said.”But (they) are becoming increasingly visible in spending choices, labour markets and consumer prices,” the report said.- ‘Significant risks remain’ -World growth is due to slow to 2.9 percent in 2026 “as front-loading ceases and higher tariff rates and still-high policy uncertainty dampen investment and trade”, the OECD said.Trump imposed a baseline 10 percent tariff on imports from around the world in April.He later hit dozens of countries with even higher duties, but the US leader also left the door open for negotiations, striking deals with Britain, Japan and the European Union, among others.The United States has yet to find a compromise with China, though the world’s two biggest economies have temporarily de-escalated their tit-for-tat tariffs while they negotiate.The overall effective US tariff rate rose to an estimated 19.5 percent in August, the highest level since 1933, the OECD said.”Significant risks to the economic outlook remain,” the OECD said.”Amid ongoing policy uncertainty, a key concern is that bilateral tariff rates could be raised further on merchandise imports,” it said.The OECD also warned that inflation could rise as food and energy prices climb, and companies begin to pass the cost of higher tariffs to consumers.”On the upside, reductions in trade restrictions or faster development and adoption of artificial intelligence technologies could strengthen growth prospects,” it said.- Growth due to slow -The OECD also upgraded the growth outlook of the United States for 2025 from 1.6 percent to 1.8 percent but that is much slower than 2.8 percent last year.US growth is expected to slow even further to 1.5 percent next year due to higher tariffs and elevated “policy uncertainty”.The OECD also pointed to the impact of Trump’s immigration crackdown and cuts in the federal workforce.The report was written before the White House raised the H-1B visa fee for high-skilled workers to $100,000, which has rattled the tech industry.”We do think that continuing to attract high-skilled individuals from the United States or from around the world is a key strength of the US economy,” said Pereira, noting that there is a labour shortage in the tech sector.The OECD raised the growth outlook of other major economies: to 4.9 percent in China, 1.2 percent in the eurozone and 1.1 percent in Japan.But it flagged a drop in industrial production in recent months in several countries, including Brazil, Germany and South Korea, and moderating consumption in the United States, China and the eurozone.

Stock markets diverged Tuesday as traders monitored key economic indicators, with US inflation data due later this week that could influence Federal Reserve policy.Paris, Frankfurt and London equities rose as investors digested purchasing managers’ index (PMI) data — a closely watched gauge of economic health. The index showed eurozone business activity hit a 16-month high in September, partly driven by solid growth in Germany, while France weighed on performance.Britain’s reading came in below expectations, suggesting the economy is losing momentum, analysts noted.Gold pushed to another all-time high and the dollar steadied. Oil prices rose around one percent after the OECD on Tuesday raised its forecast for world economic growth this year. In focus is Friday’s report on US personal consumption expenditures, the Federal Reserve’s preferred measure of inflation. Markets expect two further interest rate cuts by the Fed by the end of the year as officials aim to shore up the stuttering labour market despite elevated inflation. With trade subdued by a holiday in Japan and an approaching typhoon in Hong Kong, Asian markets mostly drifted.Hong Kong and Shanghai both closed lower. Taipei jumped more than one percent, with chip titan TSMC soaring over three percent as it tracked US counterpart Nvidia, which announced a $100 billion investment in OpenAI for next-generation artificial intelligence.A rise in tech giants helped lift major Wall Street indices to fresh highs on Monday.However, there are growing worries that the surge may have gone too far and markets are due a pullback with eyes on a possible government shutdown in Washington.”Equity indices are soaring even as the real (US) economy shows signs of strain,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.”For now, optimism around AI-driven growth and record levels of investment is keeping momentum alive, but the balancing act is precarious,” he added.Elsewhere, investors will keep an eye on an expected meeting between US President Donald Trump and his Argentine counterpart Javier Milei at the UN General Assembly. The US Treasury said Monday it stood ready to “do what is needed” to support Argentina’s economy, which has faced a plunge in the peso, stocks and bonds. Financial markets have been rattled by recent provincial election defeats for Milei’s party. – Key figures at around 1040 GMT -London – FTSE 100: UP 0.1 percent at 9,231.35 pointsParis – CAC 40: UP 0.6 percent at 7,879.24 Frankfurt – DAX: UP 0.2 percent at 23,575.63Hong Kong – Hang Seng Index: DOWN 0.7 percent at 26,159.12 (close)Shanghai – Composite: DOWN 0.2 percent at 3,821.83 (close)Tokyo – Nikkei 225: Closed for a holidayNew York – Dow: UP 0.1 percent at 46,381.54 (close)Euro/dollar: DOWN at $1.1792 from $1.1799 on MondayPound/dollar: DOWN at $1.3501 from $1.3515Dollar/yen: DOWN at 147.76 yen from 147.87 yenEuro/pound: UP at 87.34 pence from 87.30 penceWest Texas Intermediate: UP 1.2 percent at $63.03 per barrelBrent North Sea Crude: UP 1.1 percent at $67.27 per barrel

Indonesia and the European Union finalised negotiations on a trade agreement Tuesday after nearly a decade of talks, a senior minister said.The Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA) is the third deal Brussels has signed with Southeast Asian countries, after Singapore and Vietnam.The pact was signed by EU Trade Commissioner Maros Sefcovic and Indonesian Minister of Economic Affairs Airlangga Hartarto in Bali and will open investment in strategic sectors such as electric vehicles, electronics, and pharmaceuticals.”By finalising this agreement, the EU and Indonesia are sending a powerful message to the world that we stand united in our commitment to open rules-based and mutually beneficial international trade,” Sefcovic said after the signing.”In all, EU exporters will save some 600 million euros ($708 million) a year in duties paid on their goods entering the Indonesian market, and European products will be more affordable and available to Indonesian consumers,” EU President Ursula von der Leyen said in a statement.Indonesia has been in talks with the EU since 2016, but negotiations for a trade deal initially saw little progress.Issues such as palm oil and deforestation posed stumbling blocks, but US President Donald Trump’s sweeping tariff policy “created the urgency” to expedite an agreement, said Deni Friawan, researcher at the Centre for Strategic and International Studies.The trade deal also included a protocol on palm oil, the EU said in a statement, without providing details.”This is a ten-year journey that has resulted in a milestone that reflects our commitment and the commitment of stakeholders to an open, fair, and sustainable economic assistance,” Airlangga told a news conference.The agreement is expected to be implemented by 2027, Airlangga added.Around 80 percent of Indonesian exports to the EU will be tariff-free after the deal comes into force, Airlangga said in June.- Access opens –It is expected to benefit the country’s top shipments to the bloc including palm oil, footwear, textiles and fisheries, he added.The EU is Indonesia’s fifth-largest trading partner with bilateral trade reaching $30.1 billion last year.The agreement would further open up EU access to the Indonesian market of around 280 million people, Deni said.Ties had been frayed by issues including a proposed import ban by Brussels on products linked to deforestation that has angered Indonesia, a major palm oil exporter.Under the EU deforestation regulation, exports of a vast range of goods — including soy, timber, palm oil, cattle, printing paper and rubber — are prohibited if produced on land deforested after December 2020.The EU on Tuesday proposed postponing the regulation’s implementation by another year after a backlash.However, activists are concerned the trade agreement will lead to more deforestation driven by increased demand for Indonesian palm oil.”The remaining natural forests in palm oil concessions will potentially be cleared in the near future (and) converted into plantations,” said Syahrul Fitra of Greenpeace Indonesia.