The European Parliament is poised to formally suspend ratification of a major US-EU trade agreement originally negotiated in July, marking a significant deterioration in transatlantic relations. This decision, scheduled for announcement in Strasbourg on Wednesday, comes in direct response to President Donald Trump’s renewed efforts to acquire Greenland and his accompanying threats of punitive tariffs.
The escalating tensions have triggered substantial financial market volatility across continents. European markets registered a second consecutive day of declines, while US indices experienced sharp drops—the Dow Jones fell 1.7%, the S&P 500 declined over 2%, and the Nasdaq closed approximately 2.4% lower. Asian markets showed mixed performance, though safe-haven assets surged with gold exceeding $4,800 per ounce for the first time.
Key European legislators have condemned Washington’s approach. Manfred Weber, an influential German MEP, stated approval was ‘not possible at this stage,’ while Trade Committee Chair Bernd Lange declared there was ‘no alternative’ to suspension given threats against EU territorial integrity. Lange emphasized that using tariffs as coercive instruments undermines the stability of EU-US trade relations.
The suspended agreement, initially hailed as a breakthrough, would have reduced US levies on most European goods to 15% from previously threatened 30% rates. In return, Europe committed to investment pledges and regulatory changes benefiting US exports. However, the pact requires parliamentary approval to take effect.
With a temporary truce on EU retaliatory measures set to expire February 6th, the bloc must now decide whether to implement previously prepared tariffs targeting $109 billion in American goods. French President Emmanuel Macron has advocated considering retaliatory options, including the EU’s ‘trade bazooka’ anti-coercion instrument, calling Washington’s tariff accumulation ‘fundamentally unacceptable.’
US officials delivered contrasting messages at Davos. Treasury Secretary Scott Bessent urged European leaders to refrain from retaliation and ‘have an open mind,’ while Trade Representative Jamieson Greer warned that the US would respond to any retaliatory measures. The dispute occurs within a broader context of technological and metals tariff disagreements that have strained the world’s largest trade partnership, which exchanged over €1.6 trillion in goods and services in 2024.
As middle powers like Canada advocate for coordinated responses to great power rivalry, the legal foundation of Trump’s tariff regime remains uncertain pending a Supreme Court decision on their constitutionality.