Global Markets on High Alert as Europe Suspends Approval of US Trade Deal

Financial markets worldwide are on edge following reports that the European Parliament plans to suspend approval of the US trade deal agreed in July 2025. Sources close to the Parliament’s international trade committee indicate that the formal announcement is expected in Strasbourg, France, this Wednesday.

This decision represents a fresh escalation in US–Europe trade tensions, coinciding with former President Donald Trump’s intensified efforts to acquire Greenland. Trump’s latest threats to impose new tariffs over the Greenland issue have heightened concerns over possible retaliation, prompting speculation about a looming trade war.

Global Stock Market Reactions

Investors responded immediately to the announcement, with shares declining across the Atlantic. European stock markets faced a second consecutive day of losses, while in the US, major indices fell sharply:

• Dow Jones Industrial Average dropped more than 1.7%
• S&P 500 fell over 2%
• Nasdaq Composite closed approximately 2.4% lower

Meanwhile, Asia-Pacific markets showed a mixed trend on Wednesday. Japan and Hong Kong’s major indexes traded slightly lower, whereas shares in mainland China experienced modest gains.

In the commodities sector, gold prices surged above $4,800 per ounce (£3,570) for the first time, signaling growing demand for safe-haven assets amid global uncertainty. Silver prices slightly retreated from Monday’s record above $95 per ounce.

On the currency front, the US dollar remained stable against other major currencies, despite experiencing its largest daily decline of 0.5% since early December.

Background of the US–EU Trade Deal

Tensions between the US and Europe had eased temporarily after the trade deal struck at Trump’s Turnberry golf course in Scotland in July 2025. The agreement reduced US levies on most European goods to 15% from the initially proposed 30% as part of Trump’s “Liberation Day” tariffs in April. In return, the EU pledged to invest in the US and implement reforms expected to increase American exports.

However, European Parliament approval is still required to finalize the deal. The situation escalated on Saturday, hours after Trump threatened additional tariffs over Greenland, when influential German MEP Manfred Weber declared, “Approval is not possible at this stage.”

Bernd Lange, chair of the European Parliament’s committee on international trade, echoed the sentiment:

“By threatening the territorial integrity and sovereignty of an EU member state and using tariffs as coercion, the US undermines the stability and predictability of EU–US trade relations. There is no alternative but to suspend work on the Turnberry legislative proposals until the US returns to a path of cooperation rather than confrontation.”

Potential European Responses

The suspension raises critical questions about whether the EU will implement retaliatory measures against the US. Last year, the bloc outlined potential levies on €93bn ($109bn, £81bn) worth of American goods in response to Trump’s “Liberation Day” tariffs. The plan was temporarily suspended while both sides finalized the trade deal.

Without an extension or a renewed agreement, these EU levies are scheduled to take effect on 7 February 2026. French President Emmanuel Macron is among those advocating for robust retaliatory measures, including the EU’s anti-coercion instrument, informally referred to as the “trade bazooka.” Macron emphasized at the World Economic Forum in Davos that Washington’s continuous accumulation of tariffs is “fundamentally unacceptable, particularly when used to pressure territorial sovereignty.”

The US Perspective

US officials have urged Europe to exercise caution. US Treasury Secretary Scott Bessent advised European leaders in Davos to “remain calm and avoid retaliation,” while Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer warned that the US would respond to any retaliatory actions.

Greer commented, “When countries follow my advice, things tend to go well. When they don’t, unpredictable situations arise.”

The US has also expressed growing impatience with the EU’s progress toward trade deal approval, amid ongoing disagreements over technology and metals tariffs.

The Broader Global Trade Context

The US and the 27-nation European Union are each other’s largest trading partners, exchanging over €1.6tn ($1.9tn, £1.4tn) in goods and services in 2024, nearly one-third of global trade. Trump’s tariff announcements last year triggered threats of retaliation from multiple political leaders, although most European nations opted for negotiation rather than confrontation. Only China and Canada implemented retaliatory tariffs, with Canada later reversing most measures due to economic concerns.

Canadian Prime Minister Mark Carney, speaking in Davos, warned that middle powers must unite to resist a “might-makes-right” approach in global trade. He stated:

“Bilateral negotiations with a hegemon weaken sovereignty. To negotiate from strength, middle powers must collaborate, rather than compete to be the most accommodating.”

Complicating the situation, the US Supreme Court is expected to rule on the legality of several tariffs announced by Trump last year, adding another layer of uncertainty to international trade relations.