Barclays Drops U.S. Recession Forecast After Trump–China Trade Agreement
In a joint statement released Monday, both countries announced that China would reduce tariffs on U.S. goods from 125% to 10% for 90 days.
Quick overview
- Barclays has revised its U.S. economic outlook, now expecting 0.5% GDP growth in 2025 instead of a contraction.
- The bank attributes this change to easing trade tensions between the U.S. and China.
- Barclays also updated its eurozone forecast to flat growth for this year, up from a predicted contraction.
- Despite improvements, Barclays remains cautious about the eurozone's growth prospects due to ongoing uncertainties.
Barclays no longer expects the U.S. economy to fall into recession this year and has revised its growth forecasts upward, citing easing trade tensions between the United States and China.
The bank made the announcement in a research note published late Thursday.
Barclays now projects U.S. GDP will grow by 0.5% in 2025, compared to its previous forecast of a 0.3% contraction. For 2026, it has slightly raised its forecast to 1.6% from 1.5%.
The reduction in uncertainty and an improving economic backdrop also led Barclays to revise its outlook for the eurozone. The bank now expects flat growth for the region this year, up from a previously forecasted 0.2% contraction.
While Barclays still anticipates a technical recession in the eurozone during the second half of 2025, it expects the contraction to be milder than previously estimated.
“Overall, we remain cautious about the eurozone’s growth prospects,” the bank said. “Uncertainty remains high, and negotiations over reciprocal tariffs between the EU and the U.S. are still at a technical level, with no signs of meaningful progress.”
What the Trade Truce Entails
The tariff reductions agreed upon by China and the United States officially went into effect this Wednesday, following a temporary 90-day agreement reached during negotiations held last weekend in Geneva.
In a joint statement released Monday, both countries announced that China would reduce tariffs on U.S. goods from 125% to 10% for the next 90 days. The U.S., in turn, would lower its tariffs on Chinese goods from 145% to 30%, as part of the deal to de-escalate the trade war that had intensified earlier this year.
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