The Paris-based Organisation for Economic Co-operation and Development (OECD) has slashed its annual global growth forecast, warning that US President Donald Trump's tariffs blitz will stifle the world economy — hitting the United States especially hard.

After 3.3 percent growth last year, the world economy is now expected to expand by a "modest" 2.9 percent in 2025 and 2026, the intergovernmental organisation reported on Tuesday.

In its previous report in March, the OECD had forecast growth of 3.1 percent for 2025 and 3.0 percent for 2026. Since then, Trump has launched a wave of tariffs that has rattled financial markets.

"The global outlook is becoming increasingly challenging," said the OECD, an economic policy group of 38 mostly wealthy countries.

It said "substantial increases" in trade barriers, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have "marked adverse effects on growth" if they persist.

"The slowdown is concentrated in the United States, Canada, Mexico and China, with other economies expected to see smaller downward adjustments," the OECD said.

'Best option'

The "best option" is for countries to negotiate and get a deal done, the OECD's chief economist told AFP news agency.

"We basically downgraded almost every single economy of the world," Alvaro Pereira said in an interview.

"It doesn't matter if you're a G20 country, if you're a small country, small or non-G20," he said.

He said trade, consumption and investment had been affected by the tariffs.

The OECD is holding a ministerial meeting in Paris on Tuesday and Wednesday.

US and EU trade negotiators are expected to meet on the sidelines of the gathering, while the Group of Seven advanced economies is due to hold separate talks on trade.

Trump hit imports from almost every countries in the world with a 10 percent baseline tariff in April, plus 25 percent duties on the steel, aluminium and car sectors.

He also unveiled steeper tariffs on dozens of countries but has paused them until July to give space for negotiations.

Pereira warned that the world economy could suffer more if countries retaliated against the US tariffs.

"For everyone, including United States, the best option is that countries sit down and get an agreement," Pereira said.

"We think that keeping markets open, decreasing trade barriers, it's going to be absolutely essential," he said, adding that everyone would be "better off".

'Less positive' for US

While Trump believes his trade war will boost the US economy, the OECD slashed its forecast for US growth to 1.6 percent — down from 2.2 percent in its previous outlook and the biggest revision among wealthy nations.

"Of course, the United States is the country that is going to have biggest repercussions in terms of not only growth impacts from tariffs, but also on inflationary pressures," said Pereira, a former Portuguese economy minister.

"All this trade uncertainty and policy uncertainty is having an impact on consumer confidence in the United States coming down and business confidence," he said.

"So this is why we are less positive about the United States."