US set to dodge recession after President Donald Trump’s trade deal with China

By HUGO DUNCAN

Updated: 22:21 BST, 13 May 2025

The United States looks likely to avoid recession after President Donald Trump’s trade deal with China, according to two Wall Street banking giants.

Goldman Sachs said it sees a 35 per cent chance of a downturn in the world’s biggest economy this year – down from its previous forecast of 45 per cent.

And JP Morgan scrapped its prediction of recession, with chief economist Michael Feroli saying: ‘The administration’s recent dialling down of some of the more draconian tariffs placed on China should reduce the risk that the US economy slips into recession this year. 

‘We believe recession risks are still elevated, but now below 50 per cent.’

The update came as official figures showed US inflation fell to a four-year low of 2.3 per cent in April despite Trump’s tariff onslaught.

In a major de-escalation of the trade war between the world’s two largest economies, Washington this week agreed to lower tariffs on Chinese goods from 145 per cent to 30 per cent. 

Trade deal: Latest figures show US inflation fell to a four-year low of 2.3% in April despite Trump’s tariff onslaught

Beijing will cut import duties on US products from 125 per cent to 10 per cent.

The deal came just days after the US agreed to slash tariffs on British cars, steel and aluminium in a deal Trump said was only possible ‘because of Brexit’.

By contrast, US Treasury Secretary Scott Bessent yesterday said a deal with Europe ‘may be a bit slower’ because the EU has a ‘collective action problem’.

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US set to dodge recession after President Donald Trump’s trade deal with China

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