Merkel characterized the potential trade deal as "an eloquent testimony to this globalized world where we can work better together, both politically and economically."
World leaders announced on Monday that they are prepared to begin negotiations on a U.S.-EU trade deal, with the first round set to start the week of July 8 in Washington.
Obama tried to quell concerns that the United States has turned its attention away from Europe and toward the Pacific Rim, saying that "the relationship with Europe remains the cornerstone of our freedom and our security."
"The chancellor and I share the conviction that if we are successful in these negotiations, we can grow economies on both sides of the Atlantic, create jobs, improve efficiency, improve productivity and our competitiveness around the world," he said.
"And by doing so, we’re also raising standards for free trade around the world that will not just benefit us but benefit everyone."
Merkel said Europe needs to be up to the task of completing necessary structural reforms, including budget-cutting that will, in turn, help Germany and Europe as a whole meet global demand for their products.
"So it would be a very wrong tack for our policy to take if we were pursuing a kind of policy where we weaken those countries into which we, after all, wish to export our goods," Merkel said.
"I think the world is changing, however, and Europe is not competitive enough in all areas. And budget consolidation is one piece of the mosaic. Structural reforms have to come into this."
She reiterated that "Germany in the long run will only be able to live well if Europe as a whole is doing well."
While the U.S. and Europe face similar problems, "part of the challenge of the eurozone is that you have countries at different stages and levels of productivity and are further or less far along on this path of restructuring and reform," Obama said.
Obama said that while the U.S. economy is gradually emerging from a deep recession, there is still more work to do.
He highlighted lowering U.S. healthcare costs, improving workforce skills and the nation's infrastructure, investing in research and development and keeping budgets under control.
"What’s true is, though, all of us also have to focus on growth, and we have to make sure that in pursuit of our longer-term policies, whether it’s fiscal consolidation or reforms of our overly rigid labor markets, or pension reforms, that we don’t lose sight of our main goal, which is to make lives of people better," Obama said.
Obama highlighted that the U.S. is strengthening its banking system, the housing market is recovering and the economy is creating jobs.
But problems remain.
"In all countries around the world, you're seeing growing inequality, and so we have to find ways to make sure that ladders of opportunity exist for those at the bottom, and that profits and increased productivity all does not just benefit those at the top," he said.