Brokerages scale back recession odds after U.S.-China trade truce

by Reuters May 13, 2025

Major brokerages have scaled back their U.S. recession forecasts following a temporary tariff truce between the U.S. and China, which has fueled optimism for easing global trade tensions.Goldman Sachs reduced its U.S. recession forecast to 35% from 45%, marking the first major brokerage to do so, while Barclays dismissed recession risks entirely and J.P. Morgan placed the probability below 50%.

On Monday, the U.S. and China agreed to reduce tariffs on each other's imports for 90 days., with the U.S. lowering its tariffs on Chinese goods to 30% from 145% and China cutting duties on U.S. imports to 10% from 125%.

Global brokerages had raised their odds of a U.S. and global recession last month as tariff concerns threatened to weaken business confidence and slow growth.

Goldman also hiked its 2025 U.S. GDP growth forecast by 0.5 percentage points to 1%, it said in a note on Monday.

With the growth outlook potentially improving, Goldman now expects a total of three rate cuts from the Federal Reserve in 2025 and 2026. It sees one reduction in December instead of July and the remaining in March and June next year.

The brokerage had earlier predicted three rate cuts for this year itself.

"The rationale for rate cuts shifts from insurance to normalization as growth remains somewhat firmer, the unemployment rate rises by somewhat less, and the urgency for policy support is reduced," Goldman said.

Barclays and J.P. Morgan have aligned with Goldman Sachs in forecasting just one Federal Reserve rate cut in December 2025.

Previously, Barclays had projected two rate cuts in July and September, while J.P. Morgan anticipated a single reduction in September.

Goldman Sachs additionally raised the year-end target for the S&P 500 index to 6,100 points from 5,900, citing lower tariff and recession risks, according to a separate note.

The index closed at 5,844.19 points on Monday.

Citigroup, meanwhile, pushed its expectations for a Fed rate cut to July from June, it said on Monday.