U.S. Recession Probability Drops to 35% After Trade Agreement, But Risks Remain, Says Economist

U.S. Recession Probability Drops to 35% After Trade Agreement, Risks Remain

The probability of a U.S. recession in 2025 has decreased to 35% following the announcement of a temporary trade agreement, down from a higher likelihood previously, according to Ryan Sweet, Chief U.S. Economist at Oxford Economics.

Sweet notes that while the trade agreement has helped to reduce some immediate recession fears, the risks associated with tariffs and trade policy uncertainty remain significant. “Tariff-related risks continue to be skewed to the downside,” Sweet stated, cautioning that future escalations in trade tensions are still possible. Tariffs may be used as a bargaining chip in ongoing negotiations, keeping trade policy uncertainty elevated.

Sweet also warned that these uncertainties could lead to significant supply chain disruptions in the future, further adding to the complexity of the economic outlook. Despite the positive short-term effects of the trade deal, the overall risk environment remains uncertain, and the potential for future escalations could still pose challenges for the U.S. economy.

As the trade situation evolves, analysts will continue to monitor developments closely, with the possibility of further volatility on the horizon.