Barclays Optimistically Revises U.S. Forecast Following New Trade Agreement

Barclays has upgraded its U.S. economic forecast, now predicting 0.5% GDP growth in 2025 instead of a contraction, thanks to easing trade tensions with China. The eurozone outlook has also been updated to flat growth for the year. Despite optimism for the U.S., concerns remain for the eurozone amid ongoing uncertainties.

Barclays has made a notable shift in its economic outlook for the United States, no longer predicting a recession for this year. The bank shared its revised expectations in a research note released Thursday, citing a recent trade agreement between the U.S. and China as a significant factor.

The agreement involves a 90-day reduction in tariffs, where China slashes tariffs on U.S. goods from an imposing 125% down to 10%. Meanwhile, the U.S. will decrease its tariffs on Chinese imports from 145% to 30%. This truce, which took effect on Wednesday after negotiations in Geneva, seems to have boosted overall investor sentiment and economic forecasts.

As a result of this easing of tensions, Barclays forecasts that U.S. Gross Domestic Product (GDP) will grow by 0.5% in 2025, a significant change from its earlier prediction of a 0.3% contraction. Furthermore, their projection for 2026 sees a slight uptick, adjusting from 1.5% growth to 1.6% growth. The news is, of course, encouraging for American businesses and consumers alike.

In addition to its U.S. outlook, Barclays has also updated its predictions for the eurozone. Originally anticipating a contraction of 0.2%, the bank now expects growth to remain flat for this year. However, challenges loom as Barclays warns of potential economic pressure and possible technical recession in the eurozone by the second half of 2025, albeit a milder one than previously forecasted.

Despite these upgrades, Barclays maintains a cautious stance regarding the eurozone’s growth prospects. The bank emphasized, “Overall, we remain cautious about the eurozone’s growth prospects. Uncertainty remains high, and negotiations over reciprocal tariffs between the EU and the U.S. are still at a technical level, with no signs of meaningful progress.”

In summary, Barclays has moved to a more optimistic outlook for the U.S. economy, enhancing its growth expectations in light of the recent trade agreement with China. However, the situation remains complicated in the eurozone, where uncertainties continue to weigh on projected growth. A cautious watch on tariff negotiations and economic indicators seems prudent moving forward.

In short, Barclays has adjusted its forecast positively for the U.S. economy, projecting modest GDP growth due to a new trade agreement with China. By revising its expectations, the bank has lifted hopes of avoiding recession this year. Meanwhile, while the eurozone shows signs of slight improvement, Barclays remains wary of potential economic challenges lurking in the background.

Original Source: www.fxleaders.com