Barclays no longer expects the U.S. economy to enter a recession later this year and has upgraded its growth forecasts, highlighting signs of a de-escalation in U.S.-China trade tensions, Reuters reported, citing a recent note released by the bank. Barclays now expects the U.S. economy to grow by 0.5 percent this year and 1.6 percent next year, an increase from previous forecasts of -0.3 percent and 1.5 percent, respectively.

The bank also raised its euro area growth expectations due to reduced uncertainty and an improved economic backdrop. It now forecasts flat economic growth for the euro area this year, compared to a previous estimate of a 0.2 percent contraction. Barclays noted that it still expects a technical recession in the euro zone during the second half of 2025, but with growth contracting by less than previously anticipated.

Barclays expressed a cautious outlook for the euro area’s growth, citing elevated uncertainty and ongoing negotiations on reciprocal tariffs between the European Union (EU) and the U.S., which remain at a technical level without signs of progress.

Early this week, the United States and China reached a preliminary agreement to temporarily lower tariffs on each other’s goods, as the world’s two largest economies seek to resolve a damaging trade dispute. This situation has raised concerns about a potential recession and created uncertainty in financial markets.

Following discussions with Chinese representatives in Geneva, U.S. Treasury Secretary Scott Bessent announced a 90-day suspension of further actions by both nations. He indicated that tariffs would be reduced by more than 100 percentage points, establishing a new baseline rate of 10 percent. Bessent remarked that both countries effectively represented their national interests and expressed a mutual desire for balanced trade, noting that the U.S. would continue to pursue this goal.

The step-down from high tariffs for at least 90 days was viewed positively by the market, which had already anticipated favorable outcomes from the recent trade talks in Switzerland. Specifically, the U.S. would decrease tariffs to 30 percent while China would lower theirs to 10 percent, down from previous levels of up to 145 percent and 125 percent, respectively.

Source: Economymiddleeast