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Global economic downturn increases chances of US-EU trade deal

Lianna Brinded
Head of Yahoo Finance UK
L-R) French President Emmanuel Macron, German Chancellor Angela Merkel and US President Donald Trump. Photo: JOHN MACDOUGALL/AFP/Getty Images

The slowdown in the global economy will increase the chances of the US and European Union sealing a new deal amid tensions over a tit-for-tat trade war centred on tariffs.

German Economy Minister Peter Altmaier told public broadcaster Deutschlandfunk that while “the talks which lie ahead will be difficult,” he said "I was there (in the US) in June and my impression is that, for the US administration, reaching a solution is seen as more important than continuing the conflict.”

Yesterday, US president Donald Trump said that he thinks the US will be able to reach a deal with the EU soon.

He said “we're very close to maybe making a deal with the EU because they don't want tariffs. I think we're going to make a deal with the EU without having to go that route."

READ MORE: US threatens new EU tariffs on Scotch, pasta, and Italian cheese

Trump, who has strong protectionist trade policies, has threatened to impose tariffs on a range of EU goods over the last month or so.

At the beginning of July, the US Trade Representatives Office (USTR) proposed adding 89 new items to a list of proposed tariffs on EU imports. The new items, worth $4bn, come in addition to a proposal in April for tariffs on $21bn-worth of EU goods.

The proposals are “countermeasures in response to harm caused by EU aircraft subsidies,” the USTR said in a statement.

The US has repeatedly attacked the EU for supposedly unfair subsidies given to Airbus, the France aerospace giant. The Trump administration believes the support has damaged US competitor Boeing.

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However, US-led trade wars with China and the EU are starting to take its toll on investor sentiment across the globe.

This month, the US Treasury yield curve inverted for the first since the recession, sparking fears that the world’s biggest economy could be heading for a major downturn in growth.

Investors see the US Treasury yield curve as a key metric to measure the health of not just the US economy but also the global economy. Crucially, the yield curve also acts as a barometer for the outlook of the economy.