The lucky continent?

The US trade deficit shrunk further in June, to $60.2bn, the lowest deficit since September 2023. Unsurprisingly it was yet another significant decline in imports – as tariff-mitigating frontloading activities faded – that drove that decline in the deficit. That brings the US trade balance deficit even below its pre-trade war level and this suggests that we could start to see a reversal of the front-loading trade over the next few months. That also means that the backlash is yet to come for exporting countries. So, even though the US-EU trade deal was slightly more favourable than we had accounted for in our projections for the Eurozone, the economy could still slip into a technical recession.