Trump announces trade deal with EU following months of negotiations
Investing.com -- The Trump administration’s 90-day pause on reciprocal tariffs is unlikely to mark a distinct shift in the broader trade policy toward countries outside China, according to economists at Barclays (LON:BARC).
While the suspension temporarily eased financial market stress, the U.S. weighted average tariff rate on non-China imports is still expected to remain close to current levels.
The pause, announced after a surge in Treasury yields and sharp equity losses, exempts China and preserves the base 10% tariff on other countries. At the same time, tariffs on China were raised from 64% to nearly 150%, lifting the overall U.S. trade-weighted average tariff to 30%.
For the rest of the world, the effective rate has declined to around 12%, down from 17% before the suspension.
But while they expect U.S. Treasury Secretary Scott Bessent to lead many bilateral negotiations with Japan, South Korea, India, and other nations surrounding China, Barclays strategists do not forecast a material rollback in duties.
“We assume that the U.S. weighted average tariff on the world except China will end up not far from where it is now,” the strategists wrote, suggesting that most bilateral negotiations in the coming months will likely preserve the base structure.
Trump appears to be using the threat of higher tariffs as leverage, with Bessent reportedly aiming for country-level agreements that could supersede the temporary 10% rate.
Markets rallied sharply on the day of the pause announcement, with the S&P 500 jumping 9.5%. However, the rebound faded as longer-dated Treasuries continued to sell off.
Barclays maintains that mild recessions in the U.S. and Europe remain the baseline scenario amid ongoing trade uncertainties. Yet, sustained high tariffs on China could further hurt the U.S. outlook, while stable EU tariffs and targeted sectoral measures may slightly support euro area growth.
For 2026, the bank has revised its outlook to reflect reduced imports from China and a shift toward other trading partners.
It forecasts U.S. tariffs on China to eventually fall to around 60%, aligning with earlier policy signals, while tariffs on other countries are projected to remain near 11%. Overall, trade-weighted tariffs are seen settling at about 15%, slightly below previous estimates.