Barclays analysts warned that while tariff-related uncertainty may have peaked, investor focus is shifting toward the potential economic fallout from President Donald Trump’s increased trade levies.
Recent U.S. data showed weakening job growth, slowing services activity, and input costs hitting their highest level in nearly three years—raising fears of stagflation. Although second-quarter GDP growth exceeded expectations, it was driven largely by a drop in imports rather than stronger domestic demand. Consumer spending has cooled, while business and housing investment have weakened, signaling possible headwinds ahead.
Since Trump unveiled his “reciprocal tariffs” plan in April, Barclays has revised down its forecast for U.S. economic growth in the second half of 2025. Following last week’s soft jobs report, markets are now pricing in a September Fed rate cut, though upcoming inflation data could complicate the outlook.
Emmanuel Cau, head of European equity strategy at Barclays, cautioned that the unpredictability of Trump’s policy decisions heightens the risk of a market pullback, warranting downside protection.
In Europe, Barclays sees modest upside for the STOXX 600 index, forecasting it to approach 570 points by the end of 2025, up from around 542 currently.