Barclays Revises US Recession Outlook After China Trade Truce

The banking giant expects America’s economy to grow by 0.5 percent this year.

Signage on a branch of Barclays Bank in London on March 17, 2023. Peter Nicholls/Reuters

Barclays no longer expects the United States economy to fall into a recession later this year and has revised up its growth forecasts following a temporary truce in the trade war between China and the United States, it said in a note published on May 15.

The British bank said it now expects America’s economy to grow by 0.5 percent this year and 1.6 percent next year, up from previous forecasts of negative 0.3 percent and 1.5 percent, respectively.

Barclays also raised its Euro area growth expectations, with the London-headquartered banking giant forecasting flat economic growth this year amid reduced uncertainty and an improved economic backdrop.

Previously, the bank said it anticipated a 0.2 percent contraction in the eurozone.

It noted, however, that a technical eurozone recession is still expected in the second half of 2025, albeit with growth contracting by less than previously forecast.

“Overall, we remain downbeat about the growth outlook in the Euro area because uncertainty remains very elevated and the negotiations on reciprocal tariffs between the European Union (EU) and the U.S. remain at a technical level and there are no signs of progress,” Barclays said in a note.

The revised outlook from Barclays comes after officials from Washington and Beijing said they have agreed to temporarily roll back tariffs for 90 days following a meeting in Geneva over the weekend.

The deal went into effect on May 14 and applies to tariffs levied by the United States and China since April 2.

According to officials, the United States is dropping the extra tariffs it imposed on China this year to 30 percent from 145 percent, while China is slashing its levies to 10 percent from 125 percent.

The 30 percent tariff on China is made up of a 20 percent tariff imposed earlier in the year—aimed at putting pressure on Beijing to curb the illegal flow of fentanyl into the United States—and a 10 percent baseline levy tariff that is generally being placed on all U.S. trade partners.

Separate U.S. tariffs imposed on Chinese electric vehicles, steel, and aluminum over the past several years will remain in place.

After the deal was announced, JPMorgan appeared to walk back on its earlier prediction that there was a 60 percent chance the United States would fall into a recession in 2025.

The bank had said on April 15 that President Donald Trump’s unwinding of his sweeping tariffs had reduced the shock to global trading, but that baseline 10 percent tariffs on most of its trading partners remained a “material threat to growth,” while tariffs on China also increased the likelihood of an economic downturn.

Speaking to Bloomberg Television on May 15, JPMorgan CEO Jamie Dimon lowered those changes to 50 percent, pointing, in part, to Trump’s temporary trade deal with China.

Dimon didn’t rule out the possibility of a recession completely, however, saying, “I wouldn’t take it off the table at this point.”

Other major brokerages also scaled back their U.S. recession forecasts this week, including Goldman Sachs, which reduced its forecast from 45 percent to 35 percent.