Barclays now predicts U.S. GDP will grow by 0.5% in 2025 after dropping recession forecasts, thanks to easing trade tensions with China. The bank also foresees flat growth in the eurozone this year but remains cautious about its long-term outlook. A recent U.S.-China trade deal has prompted these optimistic revisions.
In an unexpected shift, Barclays has updated its U.S. economic projections, announcing it no longer anticipates a recession in the near future. The decision rests on recent trade developments between the United States and China. Specifically, the bank now sees a 0.5% GDP growth rate for 2025, a significant improvement from its previous prediction of a 0.3% contraction. This revision reflects easing trade tensions that were once a brewing storm in the economy.
Barclays also revised its forecasts for the eurozone, predicting flat growth this year, a turnabout from an earlier estimate of a 0.2% contraction. This adjustment came after a decline in uncertainty about trade relations. However, despite the positive outlook, the bank remains skeptical, cautioning that the eurozone still faces significant challenges moving forward.
The revisions were announced in a research note released late Thursday, following a consequential trade agreement between the U.S. and China. Barclays now estimates a slight uptick to 1.6% growth for the U.S. in 2026, a change from its initial forecast of 1.5%. The trade deal, reached over the weekend in Geneva, marks a pivotal moment in the U.S.-China relationship.
Under the terms of the new agreement, China is set to reduce its tariffs on U.S. goods significantly from 125% down to just 10% for a span of 90 days. In return, the U.S. has agreed to lower tariffs on Chinese products from 145% to 30%. This mutual concession is seen as a key step in diffusing escalating trade tensions that had previously put pressure on the global economy.
Despite an optimistic forecast, Barclays is warning that the eurozone’s prospects remain shaky. The bank anticipates a potential technical recession for the eurozone in the latter half of 2025, although it believes any decline will be less severe than originally thought. “Overall, we remain cautious about the eurozone’s growth prospects,” the bank stated, highlighting ongoing uncertainties that could derail progress.
As the new tariffs took effect Wednesday, both governmental entities want to solidify the terms of this truce. The next few months will be critical to observe if these adjustments can lead to lasting improvements in trade relations and economic growth. The financial landscape could shift, but it’s clear both economies have much at stake in the coming weeks and months.
Barclays’ recent upgrades to its U.S. economic outlook, reflecting a previously unexpected GDP growth, signals a shift in sentiment after the Trump-China trade deal. While the bank retains a cautious stance regarding the eurozone’s growth, stagnation is preferable to earlier predictions of contraction. The outlined tariff changes represent a pivotal development, suggesting that smoother trade relations may facilitate broader economic stability moving forward.
Original Source: www.fxleaders.com
