Tariff rollback buoys US outlook, S&P Global rules out recession

The US economy is unlikely to slip into a recession this year, according to S&P Global Ratings. While growth is expected to slow down sharply, it’s not expected to fall into negative territory, thanks in part to easing trade tensions with China.Paul Gruenwald, Global Chief Economist at S&P Global Ratings, said the rollback and pause in US-China tariffs is offering some support to growth. “With most tariffs now reduced or on hold, we are back to our earlier forecast from March,” he noted. “China’s growth is expected around 4% this year, and the US is likely to grow closer to 2% on average.”

He added that this temporary pause in the tariff war provides a small but helpful push for economic activity—at least for the next few months. “We’ll need to watch how it evolves,” he said.

Earlier S&P Global Ratings had revised its outlook for the US economy, cutting the GDP growth forecast for 2025 by 50 basis points to 1.5%. For 2026, the growth projection has been trimmed by 20 basis points, bringing it down to 1.7%.While S&P does not predict a recession in its base case, it does expect a sharp slowdown in the US economy. The US has been growing at nearly 3% over the past couple of years.
Gruenwald explained that as we move through 2025, growth could slow to between 0% and 1%. That’s a big drop, but not quite a technical recession.Read Here | China more attractive than India on valuations: Lyn Alden

When asked if further talks and reductions in tariffs could lead to benefits like lower US taxes, Gruenwald was cautious. “We were never convinced that tariff revenues would allow for big tax cuts. In reality, tariffs are just extra costs, mostly paid by US consumers,” he said.

He welcomed the rollback of tariffs and hoped for further reductions. Lower tariffs help boost growth, support central banks, and keep inflation in check, he added.

However, he also warned that US trade policy remains unpredictable. He said, “Trump style is very unorthodox, as we have seen so far, and we have had very volatile trade policy from the US, and we will just have to see how that develops in the coming quarters.”

Also Read | Goldman Sachs cuts US recession risk, sees India growth holding firm

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