Confidence among investors in Europe's largest economy Germany plunged in March, with a monthly barometer dropping to its lowest level in 18 months, reflecting fears of a transatlantic trade war.

A regular survey of 220 analysts and investors from the ZEW institute gave a reading of 5.1 points.

This marked a slump of 12.7 points from February's level and far below the 13.1 forecast by analysts.

The last time confidence among financial players was so low was in the months after Britain's June 2016 vote to quit the European Union.

"Fear of a global trade conflict caused by the USA is causing the experts to look more cautiously into the future," ZEW chief Achim Wambach said in a statement.

The institute's polling was carried out between March 5 and 19, when a war of words between Washington, Brussels and national capitals in Europe was at its height.

US President Donald Trump announced plans to slap tariffs of 25% on steel imports and 10% on aluminium, with the European Union vowing levies on American products like orange juice and motorcycles in response. 

Trump said he would hit European cars with a border tax if Brussels retaliated, stoking fears of a tit-for-tat exchange.  

Germany, home to the world's largest carmaker Volkswagen and other giants of the sector, would be especially hard hit.  

The heated rhetoric has troubled financial markets and dampened confidence in the economy, which in Germany had been in sparkling form after a year of powerful growth. 

There was a glimmer of hope for US-EU trade ties yesterday, as German Economy Minister Peter Altmaier said it was "possible to find a solution that can still avoid a decline into a heavy trade conflict" after meeting US officials in Washington.  

And "the outlook remains positive, with still very good judgements about the present state of the economy," ZEW head Wambach noted.  

Investors' view of the present state of the German economy and of the 19-nation euro zone fell back only slightly in the March survey.