Barclays revised its U.S. growth forecast to 0.5% for 2025 due to eased U.S.-China trade tensions. The eurozone forecast improved to flat growth, though uncertainties remain. Overall, Barclays does not expect a recession this year.
Barclays has updated its economic outlook for the United States, asserting that the likelihood of a recession this year has diminished significantly. In a report that followed a major trade agreement between the U.S. and China, the bank now anticipates a modest 0.5% growth for U.S. GDP in 2025, a notable shift from its earlier prediction of a 0.3% contraction. The announcement, made late Thursday, marks a significant change in outlook for both economies involved.
This revised forecast is primarily attributed to easing trade tensions between the two economic giants. High tariffs, which had been a source of concern, are set to decrease significantly. Specifically, a joint statement confirmed that China will lower its tariffs on U.S. goods from a staggering 125% to just 10% for an initial period of 90 days, starting this week. Meanwhile, the U.S. will reciprocate by reducing its tariffs on Chinese products from 145% to 30%.
Additionally, Barclays has made updates to its projections for the eurozone, predicting flat growth for the region this year instead of the contraction of 0.2% previously forecasted. Despite this positive adjustment, the bank remains cautious about the eurozone’s economic prospects. “Overall, we remain cautious about the eurozone’s growth prospects,” Barclays noted, highlighting ongoing uncertainties and the technical status of tariff negotiations between the EU and the U.S.
Looking ahead, while Barclays does foresee a potential technical recession in the eurozone during the latter half of 2025, they expect this downturn to be less severe than previously estimated. The reduction in uncertainty, prompted by the recent trade agreements, has contributed to these more optimistic forecasts.
As the trade landscape shifts, Barclays’ cautious optimism reflects a desire to acknowledge improvement while remaining aware of the complexities that lie ahead. The economic backdrop may be improving, but significant risks remain that could impact growth in both the U.S. and the eurozone moving forward.
In summary, Barclays has upgraded its U.S. economic forecast, anticipating a 0.5% growth for 2025, as trade tensions ease between the United States and China. The eurozone’s growth prediction also sees a positive revision, now expecting flat growth. However, Barclays maintains a cautious approach as uncertainties persist and further negotiation complexities could emerge.
Original Source: www.fxleaders.com
