Jonathan Josephs,Economic journalistAnd
Nick Edser,Economic journalist
Bloomberg via Getty Images
The European Parliament is considering suspending approval of the US trade deal reached in July, according to sources close to its international trade committee.
The suspension is expected to be announced Wednesday in Strasbourg, France.
The move would mark a further escalation of tensions between the United States and Europe, as Donald Trump steps up his efforts to acquire Greenland, threatening new tariffs over the issue this weekend.
The standoff has roiled financial markets, reigniting talk of a trade war and the possibility of retaliation against the United States for its trade measures.
Stocks on both sides of the Atlantic were lower on Tuesday, with European stock markets seeing a second day of losses. In the United States, the Dow Jones fell more than 1.7%, while the S&P 500 fell more than 2% and the Nasdaq closed down about 2.4%.
On the foreign exchange markets, the US dollar also fell sharply. The euro rose more than 0.8% against the dollar to $1.1749, before falling again, while sterling also jumped before ending the day up 0.1% at $1.343.
Borrowing costs also rose around the world, as the biggest sell-off of long-term government debt in months pushed up yields on 30-year bonds in markets including the United States, Britain and Germany.
Trade tensions between the United States and Europe have eased since the two sides reached a deal at Trump’s Turnberry golf course in Scotland in July.
This agreement set US levies on most European products at 15%, down from the 30% that Trump had initially threatened as part of his “Liberation Day“Wave of customs duties in April. In exchange, Europe agreed to invest in the United States and make changes on the continent that should boost American exports.
The deal still needs to be approved by the European Parliament to become official.
But on Saturday, hours after Trump threatened US tariffs on Greenland, Manfred Weber, an influential German lawmaker in the European Parliament, said “approval is not possible at this stage.”
And Bernd Lange, who chairs the European Parliament’s international trade committee, said there was “no other alternative” than to suspend the deal over threats to Greenland.
“By threatening the territorial integrity and sovereignty of an EU member state and using tariffs as a coercive instrument, the United States is undermining the stability and predictability of trade relations between the EU and the United States,” said Lange, whose committee must approve the deal before heading to Parliament for a final vote.
“There is no alternative but to suspend work on the two Turnberry legislative proposals until the United States decides to recommit itself to the path of cooperation rather than confrontation, and before further action is taken.”
The move raises the question of whether the EU will move forward with its threats of retaliation against the United States.
The bloc last year announced a potential 93 billion euros ($109 billion, £81 billion) worth of US goods that could be subject to taxes in response to Trump’s “Liberation Day” tariffs, before shelving the plan while the two sides finalized the details of a deal.
But that reprieve ends on February 6, meaning the EU levies will take effect on February 7 unless the bloc requests an extension or approves the new deal.
French President Emmanuel Macron is among those urging the EU to consider its retaliatory options, including the anti-coercion instrument, nicknamed the “commercial bazooka.”
Washington’s “endless accumulation” of new tariffs is “fundamentally unacceptable, even more so when used as leverage against territorial sovereignty,” he said in a speech at the World Economic Forum in Davos.
American response
Also speaking in Davos, US Treasury Secretary Scott Bessent reiterated his warning to European leaders against retaliation, urging them to “have an open mind.”
“I tell everyone to sit down. Take a deep breath. Don’t retaliate. The president will be here tomorrow and he will get his message across,” he said.
Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer warned that the United States would not let retaliation go unanswered.
“What I’ve found is that when countries follow my advice, they tend to get away with it. When they don’t, crazy things happen,” Greer said, in comments reported by Agence France-Presse.
The United States has had previously expressed impatience with European progress towards approving the deal amid ongoing disagreements over tariffs on technology and metals.
The United States and the 27-nation European Union are each other’s largest trading partners, with more than 1.6 billion euros ($1.9 billion) worth of goods and services traded in 2024, according to European figures. This represents almost a third of all global trade.
When Trump began announcing tariffs last year, it sparked threats of retaliation from many political leaders, including in Europe.
But in the end, many chose to negotiate.
Only China and Canada maintained their threats to impose tariffs on U.S. goods, with Canada quietly withdrawing most of the measures in September over concerns they would harm the Canadian economy.
In a speech in Davos on Tuesday, Canadian Prime Minister Mark Carney urged “middle powers” to unite to fight the world of might and the right, characterized by great power rivalry, which he said was emerging.
“When we negotiate only bilaterally with a hegemon, we negotiate out of weakness. We accept what is offered to us. We compete with each other to be the most accommodating,” he warned. “It’s not sovereignty. It’s the exercise of sovereignty while accepting subordination.”
Looming in the background of trade tensions is a pending Supreme Court ruling on the legality of many of the tariffs Trump announced last year.
