Global financial markets are on high alert following reports that the European Parliament is preparing to suspend approval of a major trade agreement with the United States, a move that could further escalate tensions between Washington and Brussels.
Sources close to the European Parliament’s international trade committee said the suspension, expected to be announced in Strasbourg, France, on Wednesday, would halt progress on the US–EU trade deal agreed in July.
The agreement still requires parliamentary approval to take effect.
The decision comes amid rising political friction sparked by US President Donald Trump’s renewed push to assert control over Greenland, including fresh threats of tariffs against Europe over the weekend.
The standoff has reignited fears of a trade war and unsettled investors worldwide.
Markets reacted sharply. European stocks recorded a second consecutive day of losses on Tuesday, while US markets also slumped.
The Dow Jones Industrial Average fell more than 1.7%, the S&P 500 dropped over 2%, and the Nasdaq closed about 2.4% lower.
In Asia-Pacific trading on Wednesday, markets were mixed, with declines in Japan and modest losses in Hong Kong, while mainland Chinese shares edged slightly higher.
Investors have increasingly turned to safe-haven assets. Gold surged above $4,800 (£3,570) an ounce for the first time, extending a strong rally driven by geopolitical and economic uncertainty.
Silver slipped slightly from its record high above $95 an ounce reached earlier in the week.
Meanwhile, the US dollar steadied after suffering its largest daily fall since early December.
Trade relations between the US and Europe had shown signs of easing after the two sides reached an agreement at Trump’s Turnberry golf course in Scotland last July.
Under that deal, US tariffs on most European goods were set at 15%, reduced from the 30% initially threatened.
In return, the EU agreed to increase investment in the US and make policy adjustments aimed at boosting American exports.
However, European lawmakers have hardened their stance following Trump’s latest tariff threats linked to Greenland.
Influential German MEP Manfred Weber said over the weekend that approval of the deal was “not possible at this stage.”
Bernd Lange, chair of the European Parliament’s international trade committee, said there was “no alternative” but to suspend work on the agreement.
“By threatening the territorial integrity and sovereignty of an EU member state and using tariffs as a coercive instrument, the US undermines the stability and predictability of EU–US trade relations,” Lange said.
The move raises fresh questions about whether the EU will revive plans to retaliate against the US.
Last year, the bloc outlined potential tariffs on €93bn ($109bn, £81bn) worth of American goods in response to Trump’s earlier “Liberation Day” tariffs, but paused the measures while negotiations continued.
That pause is due to expire on February 6, meaning EU countermeasures could take effect the following day unless an extension is agreed or the deal is approved.
French President Emmanuel Macron has urged EU leaders to consider all options, including deploying the bloc’s anti-coercion instrument often dubbed a “trade bazooka.”
Speaking at the World Economic Forum in Davos, he said Washington’s “endless accumulation” of tariffs was “fundamentally unacceptable,” particularly when tied to issues of territorial sovereignty.
US officials, however, have warned Europe against retaliation.
Treasury Secretary Scott Bessent urged restraint, telling European leaders in Davos to “take a deep breath” and avoid escalating the dispute.
Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer also cautioned that any retaliation would prompt a response from Washington.
The US and the European Union remain each other’s largest trading partners, with more than €1.6tn ($1.9tn, £1.4tn) in goods and services exchanged in 2024 nearly a third of global trade.
As tensions rise, analysts note that a looming US Supreme Court ruling on the legality of many of Trump’s tariffs could further complicate the global trade outlook, adding another layer of uncertainty to already volatile markets.
