Biden could reduce inflation, mitigate a recession, and strengthen democracy with a new EU-US trade agreement

by Sanjay Patnaik and James Kunhardt, Brookiings Press



On both sides of the Atlantic, economies are showing signs of turmoil: Inflation is at the 

highest level in more than 40 years, the U.S. stock market has plunged significantly since its peak on January 3, and expectations for a recession are increasing both in the EU and in the U.S., particularly as the Federal Reserve and the European Central Bank are aggressively increasing 

interest rates to combat inflation. At the same time, the Russian war against Ukraine—with implicit 

support from China—has underlined the importance of the transatlantic partnership as a democratic bulwark against brutal authoritarian regimes and as a pillar of stability in the world. Policymakers looking for solutions to combat rapidly rising prices—fueled by a mix of 

supply chain bottlenecks (leading to a shortage of certain goods), 

rising energy prices, and 

heightened consumer demand—have largely turned to traditional monetary policy by raising interest rates, risking recession.

However, unfortunately, neither policymakers in the U.S. nor in the EU have so

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