US-China Trade Truce Cuts Recession Odds Across Markets

The recent 90-day trade truce between the U.S. and China, featuring significant tariff reductions, has led major brokerages such as Goldman Sachs, Barclays, and J.P. Morgan to scale back their recession forecasts and adopt more optimistic economic outlooks. Goldman Sachs lowered its recession probability to 35% and raised its 2025 GDP growth forecast, now anticipating three Federal Reserve rate cuts in 2025 and 2026, while Barclays and J.P. Morgan predict one rate cut by December 2025. This truce has improved market sentiment broadly, with equities rising and cryptocurrencies experiencing gains, reflecting renewed risk appetite and expectations of easing global trade tensions. Analysts highlight that the positive scenario is bolstered not only by tariff reductions but also by anticipated clarity on tax legislation, deregulation efforts, and a long-term manufacturing renaissance with increased reshoring. However, some forecasters caution that while the trade deal may avert an immediate recession, it may not prevent a near-term economic slowdown, as labor market impacts and inflation pressures could still emerge. Overall, the trade truce marks a pivot towards a more diplomatic approach in global economic relations, fostering hope for stability and growth heading into 2026.