US inflation not to ease before 2026 as Trump tariffs slow down America's economy

US inflation pressures may persist until at least 2026, driven by President Donald Trump’s escalating tariffs that are slowing economic growth, the Organisation for Economic Co-operation and Development said Tuesday (June 3).

The OECD downgraded its economic forecasts for the United States, citing continued trade conflicts, rising policy uncertainty, reduced net immigration, and a shrinking federal workforce. The organisation now projects US growth to slow significantly to 1.6 per cent this year, a substantial revision from its earlier March forecast of 2.2 per cent growth for 2025.

OECD has further predicted US’ economic growth declining to 1.5 per cent in 2026.

It’s not just the intergovernmental organisation that holds this view.

Fed frets over tariffs, inflation

Recently, Federal Reserve Governor Christopher Waller acknowledged that tariffs would likely boost inflation and unemployment in the short term.

Speaking at an economic forum, Waller expressed concerns about the uncertainty surrounding the tariff policies, particularly following President Trump’s decision on Friday to double steel and aluminum tariffs from 25 per cent to 50 per cent.

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“As of today, I see downside risks to economic activity and employment and upside risks to inflation in the second half of 2025,” Waller said, according to Bloomberg. “But how these risks evolve is strongly tied to how trade policy evolves.”

Waller added that while tariffs are expected to push inflation higher in coming months, the Federal Reserve remains inclined to “look through” temporary price increases, provided inflation expectations remain stable.

Fed officials have indicated a cautious stance, maintaining current interest rates until the impacts of tariff policy and economic developments become clearer.

Goldman Sachs predicts “mediocre” performance

This week, economists at Goldman Sachs, too, concurred with concerns about prolonged inflation, particularly if trade conflicts escalate further.

“The main reason is that we expect the economy to be weak this year, with GDP growing just 1 per cent,” Goldman Sachs economists stated in a recent report, according to Axios. “We are skeptical about the prospects for prolonged high inflation amidst mediocre economic performance.”

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However, Goldman analysts warned that inflation could persist longer if country-specific tariffs return to prohibitive levels or continue escalating into 2026, diverging from their baseline expectations.