Sources close to the European Parliament’s international trade committee indicate that the body is considering suspending approval of the US tariffs agreement reached in July.
An official announcement regarding the potential suspension is anticipated Wednesday in Strasbourg, France.
This development would signify a further escalation of tensions between the US and Europe, particularly in light of recent efforts by Donald Trump to pursue the acquisition of Greenland, coupled with threats of new tariffs over the weekend.
The ongoing stand-off has unsettled financial markets, reigniting discussions of a potential trade war and possible retaliatory measures against the US for its trade policies.
Shares on both sides of the Atlantic experienced declines on Tuesday, with European stock markets marking a second consecutive day of losses. In the US, the Dow Jones Industrial Average fell by over 1.7%, while the S&P 500 dropped by more than 2%, and the Nasdaq Composite closed approximately 2.4% lower.
Currency markets also reflected the uncertainty, with the US dollar experiencing a sharp decline. The euro initially rose more than 0.8% against the dollar to $1.1749 before retracing, while the pound sterling also saw an initial increase before closing the day up 0.1% at $1.343.
Global borrowing costs have also risen, as a significant sell-off of long-term government debt pushed yields higher on 30-year bonds in major markets, including the US, UK, and Germany.
Trade tensions between the US and Europe had seen a period of relative calm following the agreement reached at Trump’s Turnberry golf course in Scotland in July.
That agreement set US levies on European goods at 15%, a reduction from the initial 30% Trump had threatened as part of his “Liberation Day” tariff proposals in April. In return, Europe committed to investments in the US and regulatory changes aimed at boosting US exports.
The deal requires approval from the European Parliament to be formally enacted.
However, following Trump’s recent tariff threats concerning Greenland, Manfred Weber, a prominent German member of the European Parliament, stated on Saturday that “approval is not possible at this stage.”
Bernd Lange, chairman of the European Parliament’s committee on international trade, has indicated that suspending the deal is “unavoidable” given the threats pertaining to Greenland.
“By threatening the territorial integrity and sovereignty of an EU member state and by using tariffs as a coercive instrument, the US undermines the stability and predictability of EU–US trade relations,” stated Lange, whose committee’s approval is required before the agreement can proceed to a parliamentary vote.
“There is no alternative but to suspend work on the two Turnberry legislative proposals until the US decides to re-engage on a path of cooperation rather than confrontation, and before any further steps are taken.”
The unfolding situation raises questions about potential retaliatory measures from the EU against the US.
The bloc had previously identified approximately €93bn ($109bn, £81bn) worth of American goods that could be subjected to levies in response to Trump’s “Liberation Day” tariffs, but put those plans on hold pending finalization of the deal.
The reprieve is set to expire on 6 February, meaning EU levies will take effect on 7 February unless an extension is granted or the new deal receives approval.
French President Emmanuel Macron is among those advocating for the EU to consider its retaliatory options, including the anti-coercion instrument, often referred to as a “trade bazooka.”
Washington’s “endless accumulation” of new tariffs is “fundamentally unacceptable, even more so when they are used as leverage against territorial sovereignty,” he stated during a speech at the World Economic Forum in Davos.
Also speaking in Davos, US Treasury Secretary Scott Bessent cautioned European leaders against retaliation, urging them to “have an open mind.”
“I tell everyone, sit back. Take a deep breath. Do not retaliate. The president will be here tomorrow, and he will get his message across,” he stated.
Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer cautioned that the US would respond to any retaliatory actions.
“What I’ve found is that when countries follow my advice, they tend to do okay. When they don’t, crazy things happen,” Greer said, in remarks reported by the Agence France-Presse.
The US has previously voiced concerns regarding the pace of European progress toward approving the agreement amid lingering disagreements over tech and metals tariffs.
The US and the 27-nation European Union are significant trade partners, with over €1.6tn ($1.9tn, £1.4tn) in goods and services exchanged in 2024, according to European figures. This represents nearly a third of all global trade.
When Trump initially announced tariffs last year, it prompted retaliatory threats from numerous political leaders, including those in Europe.
Ultimately, many chose to pursue negotiations instead.
Only China and Canada acted on their threats to impose tariffs on American goods, with Canada quietly withdrawing most of those measures in September, citing concerns about potential damage to the Canadian economy.
In a speech in Davos on Tuesday, Canadian Prime Minister Mark Carney urged “middle powers” to unite to counter the emerging “might-makes-right” dynamic in great power rivalries.
“When we only negotiate bilaterally with a hegemon, we negotiate from weakness. We accept what is offered. We compete with each other to be the most accommodating,” he warned. “This is not sovereignty. It is the performance of sovereignty while accepting subordination.”
Adding to the uncertainty is a pending Supreme Court decision regarding the legality of many of the tariffs announced by Trump last year.
Democratic Governor Walz, Mayor Frey and the state’s attorney general are among those targeted over anti-ICE protests.
The US president says it is “another in a very long line of National Security reasons why Greenland has to be acquired”.
Trump’s demands over Greenland are a rude awakening in a moment fraught with risk.
Neither the Kremlin nor the US president has confirmed whether Putin has accepted the offer.
Trump has criticised the deal under which the UK keeps control of the joint UK-US Diego Garcia military base.