Europe to suspend approval of US trade deal as markets fall

The European Parliament plans to suspend approval of the US trade deal agreed in July, according to sources close to the International Trade Commission.

The suspension is scheduled to be announced in Strasbourg, France, on Wednesday.

The move represents another escalation in tensions between the United States and Europe, as Donald Trump intensifies his efforts to seize Greenland and threatens new tariffs on the issue at the end of the week.

The confrontation shook financial markets and revived talk of a trade war and the possibility of retaliation against the United States for its trade measures.

Stocks fell on both sides of the Atlantic on Tuesday, with European stock markets seeing a second day of losses. In the United States, the Dow Jones index fell by more than 1.7%, while the S&P 500 index fell by more than 2%, and the Nasdaq index closed down by about 2.4%.

Markets in the Asia-Pacific region opened lower on Wednesday, with Japan’s benchmark Nikkei 225 index falling about 0.5%, with major indexes in South Korea and Australia also falling.

The price of gold continued to make gains, rising above $4,800 (£3,570) an ounce for the first time. Silver also rose to more than $95 an ounce.

Precious metals are seen as safer assets to hold during times of uncertainty, and both gold and silver prices have risen over the past year.

In currency markets, the US dollar also fell sharply. The euro rose more than 0.8 percent against the dollar to $1.1749 before falling, while the pound sterling also jumped before ending the day up 0.1 percent at $1.343.

Borrowing costs also rose around the world, with the biggest sell-off of long-term government debt in months sending yields on 30-year bonds higher in markets including the United States, the United Kingdom and Germany.

Trade tensions between the United States and Europe have eased since the two sides reached an agreement at the Trump Turnberry golf course in Scotland in July.

This agreement set US tariffs on most European goods at 15%, down from the 30% that Trump initially threatened as part of his plan.Liberation day“A wave of tariffs in April. In return, Europe agreed to invest in the United States and make changes on the continent that are expected to boost American exports.

The deal still needs approval from the European Parliament to become official.

But on Saturday, hours after Trump threatened to impose US tariffs on Greenland, Manfred Weber, an influential German member of the European Parliament, said “agreement is not possible at this stage.”

Bernd Lange, who chairs the European Parliament’s international trade committee, said there was “no alternative” but to suspend the deal due to threats over Greenland.

“By threatening the territorial integrity and sovereignty of an EU member state and using tariffs as a coercive tool, the United States is undermining the stability and predictability of EU-US trade relations,” said Lange, whose committee needs to sign off on the deal before it heads to Parliament for a final vote.

He added: “There is no alternative but to suspend work on Turnberry’s two legislative proposals until the United States decides to return to the path of cooperation instead of confrontation, and before taking any other steps.”

The decision raises questions about whether the European Union will go ahead with threats of retaliation against the United States.

The EU announced a potential €93bn worth of US goods ($109bn, £81bn) on which it could be imposed with tariffs last year in response to Trump’s “Liberation Day” tariffs before shelving the plan, while the two sides finalized details of the deal.

But that postponement expires on February 6, meaning the EU tariffs will come into force on February 7 unless the bloc moves to extend them or agrees to the new deal.

French President Emmanuel Macron was among those urging the EU to consider its retaliatory options, including an anti-coercion tool, nicknamed the “trade bazooka.”

Washington’s “endless accumulation” of new tariffs “is fundamentally unacceptable, even more so when they are used as leverage against regional sovereignty,” he said in a speech at the World Economic Forum in Davos.

Also speaking in Davos, US Treasury Secretary Scott Besent repeated his warning to European leaders against retaliation, urging them to “keep an open mind.”

He said, “I tell everyone: Sit down. Take a deep breath. Do not retaliate. The president will be here tomorrow and will deliver his message.”

Commerce Secretary Howard Lutnick and US Trade Representative Jamison Greer warned that the United States would not let retaliation go unanswered.

“What I found is that when countries follow my advice, they tend to do well,” Greer said in statements reported by Agence France-Presse. “And when they don’t, crazy things happen.”

The United States has He previously expressed his impatience with European progress towards approving the deal Amid ongoing disputes over definitions of technology and minerals.

The US and the 27-nation European Union are each other’s largest trading partners, with more than €1.6 trillion ($1.9 trillion, £1.4 trillion) in goods and services exchanged in 2024, according to European figures. This represents nearly a third of total 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 instead.

Only China and Canada have followed through on their threats to impose tariffs on US goods, with Canada quietly withdrawing most of those measures in September, fearing they were hurting the Canadian economy.

In a speech in Davos on Tuesday, Canadian Prime Minister Mark Carney urged “middle powers” to unite to confront the world of great power rivalry that he warned might makes right.

“When we negotiate only bilaterally with a dominant state, we negotiate from a place of weakness,” he warned. “We accept what is offered to us. We compete with each other to be the most accommodating.” “This is not sovereignty. It is performing sovereignty while accepting subordination.”

Looming in the backdrop of trade tensions is a pending Supreme Court decision on whether several tariffs announced by Trump last year are legal.