Barclays has upgraded its U.S. growth forecast to 0.5% for 2025, attributing this to improved trade relations with China. The eurozone outlook has changed to flat growth, but risks remain. The recent trade agreement includes significant tariff reductions for both nations, effective for 90 days.
Barclays has revised its outlook for the United States economy, now predicting a modest growth of 0.5% for 2025. This update is significant, especially since it contrasts sharply with the bank’s earlier forecast of a contraction. The favorable change is credited to the easing of trade tensions between the U.S. and China, which have been under scrutiny for months. The bank’s research note, published late Thursday, reflects on this newfound optimism.
The current projections suggest a slight uptick in GDP growth for 2026 as well, moving from 1.5% to 1.6%. Earlier expectations had painted a grim picture, hinting at a possible recession. Barclays’ revised forecast indicates a more stable economic environment. However, caution persists, particularly regarding the eurozone, which is now expected to experience flat growth this year, up from a previous estimate of a 0.2% downturn.
While it is encouraging to see positive adjustments, Barclays remains apprehensive about Europe’s economic trajectory. The bank noted potential technical recessions could still be on the horizon for the eurozone in the latter half of 2025, albeit milder than initially expected. There are uncertainties that can influence future growth, which keeps Barclays on alert.
The recent agreement between the U.S. and China, officially implemented this Wednesday, forms the basis for the optimistic new predictions. In a collaborative statement made earlier this week, China announced it would reduce tariffs on U.S. goods from a staggering 125% to just 10% over a trial period of 90 days. The U.S. will match this reduction by lowering tariffs on Chinese goods from 145% to 30%.
This agreement represents a step toward de-escalating the intense trade tensions that have gripped the global economy recently. Both governments had engaged in negotiations over the weekend in Geneva to reach this temporary deal. However, as Barclays indicated, ongoing tariffs discussions between the European Union and the U.S. continues to loom large over the eurozone, leaving room for justifiable caution moving forward.
In conclusion, Barclays has taken a more optimistic stance on the U.S. economy, now projecting positive GDP growth rather than recession. However, uncertainties continue to linger, particularly concerning the eurozone’s economic conditions. Overall, while the recent U.S.–China trade agreement offers hope for stabilization, the situation remains fluid and unpredictable.
Original Source: www.fxleaders.com
