Investing.com - A trade agreement between the U.S. and China has prompted Barclays to upwardly revise its U.S. growth forecasts and predict that the world’s largest economy will not slip into a recession later this year, the bank said in a note released late Thursday.
It now expects the U.S. economy to grow 0.5% this year and 1.6% next year, up from previous forecasts of -0.3% and 1.5%, respectively.
Reduced uncertainty and an improved economic backdrop also led Barclays to lift its euro area growth expectations. It now forecasts flat economic growth this year, compared to a 0.2% contraction previously.
Barclays still expects a technical eurozone recession in the second half of 2025, but with growth contracting by less than previously forecast.
"Overall, we remain downbeat about the growth outlook in the euro area because uncertainty remains very elevated and the negotiations on reciprocal tariffs between the European Union and the U.S. remain at a technical level and there are no signs of progress," Barclays said in a note.
On Monday, the U.S. and China agreed to lower tit-for-tat tariffs and temporarily delay their respective levies for 90 days.
The move comes after U.S. President Donald Trump slapped soaring duties of at least 145% on China, leading Beijing to respond with its own retaliatory tariffs of 125%.
Following the deal, the U.S. tariffs on China were brought down to 30%, folding in a baseline 10% levy and separate 20% duties related to Beijing’s alleged role in the flow of the illegal drug fentanyl. China, meanwhile, cut its tariffs on U.S. items to 10%.
Trump previously announced -- and then also paused -- so-called "reciprocal" tariffs on both friends and adversaries in April.
However, analysts have noted that tariffs remain above levels at the beginning of Trump’s second term in power earlier this year and are at the highest since the 1930s.