After weeks of tariff-induced uncertainty and fatigue, Barclays has some more bad news for investors: A U.S. recession is most likely brewing on the horizon. In a Monday note, Barclays’ Ajay Rajadhyaksha attributed a coming economic slowdown to a myriad of factors, including repeated mixed messages on U.S. tariffs. Equities have recovered a good portion of their losses since April 2 — the day President Donald Trump announced his new tariff policies — but investors may be too optimistic, since average tariffs in the U.S. are set to increase roughly tenfold versus 2024. “Hard data has softened less than surveys, but a recession is increasingly likely,” wrote Rajadhyaksha, the bank’s head of rates and securitized products research. “All told, we expect a sharp slowdown, and a likely U.S. recession in the coming quarters.” Hard economic data refers to more measurable metrics such as labor market reports alongside GDP and production readings. On the other hand, soft economic data refers to surveys and sentiment indicators such as consumer confidence. Soft data has already fared poorly in recent months, while hard data has been relatively more resilient due to front-running of products by consumers. Unfortunately, Rajadhyaksha expects hard data to follow the performance of soft data with a lag, as the real effect of China-related shortages begins to materialize over the coming weeks. Meanwhile, Rajadhyaksha also highlighted that inbound tourism will likely be impaired going forward, with numerous airlines such as Southwest, American and Delta already pulling their 2025 forecasts . This may further contribute to a deterioration in hard data and usher in an economic recession. Rajadhyaksha said investors should practice caution. “We recommend underweighting risk assets and owning duration,” he wrote.
