By Philip Blenkinsop and Trevor HunnicuttBRUSSELS/WASHINGTON (Reuters) -The European Union and the U.S. are heading for a potential trade deal that includes a 15% U.S. baseline tariff on EU goods and possible exemptions,

U.S. President Donald Trump’s trade deal with Japan has sparked fresh optimism that the global economy will manage to avoid getting hit with extremely elevated tariffs, even as many U.S. trading partners still don’t have agreements.

An escalatory spiral that leads towards Eurasia's 10% 'trade war' scenario, however, would prompt Brussels to deploy escalatory measures, such as "export controls/duties, public procurement curbs, and/or penalties on U.S. services exports" by using the ACI "trade bazooka as a last resort," they concluded.