Jonathan Millar, an economist at Barclays, stated that the sweeping new tariffs announced by the U.S. administration on what has been dubbed "Liberation Day" have triggered a stronger-than-expected stagflationary shock, heightening the risk of both rising inflation and economic recession later this year.
Trade-Weighted Tariffs Reach 23% with Asia Particularly Affected
According to Barclays, the new round of reciprocal tariffs translates into a trade-weighted tariff rate of around 23%, which is about eight percentage points higher than the bank’s prior assumptions.
Tariff rates vary by country, ranging between 10% and 50%, with sector-specific exemptions for energy and certain essential imports.
While Mexico and Canada have largely been exempted, Asian economies are expected to bear the brunt of the impact.
In a research note, Millar wrote:
The administration’s ‘Liberation Day’ announcement imposed broader-than-expected tariffs on most major trading partners, resulting in a larger-than-expected stagflationary impulse.”
Equity Markets React with a Weekly Decline
U.S. equity markets ended the week lower as investors digested the scope of the new tariff policy and its potential implications for global trade and domestic economic conditions.
Barclays Forecasts: GDP Contraction and Higher Unemployment
Barclays now expects U.S. GDP to contract in the second half of 2025, along with a rise in the unemployment rate to 4.7% by early 2026.
On the inflation front, the bank revised its outlook upward, now projecting:
Core PCE inflation to reach 3.7% year-over-year in Q4 2025,
Then ease to 2.7% by Q4 2026.
The Fed’s Path Forward Amid Political Pressure
Labor Market Shows Temporary Strength
Millar also noted that the U.S. labor market data for March 2025 remained resilient, with nonfarm payrolls demonstrating continued strength despite economic headwinds.
