The European Parliament's international trade committee moved to suspend its approval of a trade deal with the United States following US President Donald Trump's stated interest in acquiring Greenland and subsequent tariff threats. The decision effectively stalled a deal agreed upon in July. Hours after the Parliament's action, President Trump announced the withdrawal of his tariff threat, citing a "framework of a future deal" concerning Greenland and the Arctic Region.
Parliament's Decision
On Wednesday, the European Parliament's international trade committee indicated its intention to suspend formal approval of a trade deal with the United States. This action, expected to be announced in Strasbourg, France, effectively halted the ratification process for the agreement reached the previous July. Bernd Lange, chair of the committee, stated that the decision was made due to "continued and escalating threats, including tariff threats, against Greenland and Denmark, and their European allies." He added that progress on the deal would not resume "until the US decides to re-engage on a path of cooperation rather than confrontation" and that "Our sovereignty and territorial integrity are at stake."
Background on the Trade Deal
The trade deal, sometimes referred to as the "Turnberry deal," was initially agreed upon in July. It included an agreement for US levies on most European goods to be set at 15%, a reduction from an initial 30% threatened by President Trump in April. The US also removed tariffs on generic pharmaceuticals from the EU. In return, Europe committed to US investments and changes aimed at boosting US exports, and to lower tariffs on certain US goods. The agreement required European Parliament approval to become official.
Greenland Dispute and Tariff Threats
Tensions escalated following President Trump's publicly stated interest in acquiring Greenland, an autonomous territory of Denmark and an EU member state. Prior to the Parliament's suspension decision, President Trump had threatened tariffs on seven European Union countries and the United Kingdom if they did not allow the United States to control Greenland. He had also previously hinted at military acquisition, although he later clarified at the World Economic Forum that he did not intend to use force, focusing instead on tariff threats. Lange stated that the US was "undermining stability in trade relations" by threatening an EU member state's territorial integrity and using tariffs coercively, adding that the US was "violating the terms of the previous trade agreement."
US Withdrawal of Tariff Threat
Hours after the European Parliament's decision to block the vote on the trade deal, President Trump announced the withdrawal of his tariff threat. He stated that a "framework of a future deal" concerning Greenland and the Arctic Region had been established following a meeting with NATO Secretary General Mark Rutte. Based on this understanding, Trump confirmed that the tariffs scheduled for February 1st would not be implemented. The specific details of this "framework" remained unclarified at the time.
Market Reactions
Financial markets responded to the initial news of the suspension and escalating tensions. On Tuesday, shares in Europe and the US fell. The Dow Jones decreased by over 1.7%, the S&P 500 by more than 2%, and the Nasdaq closed approximately 2.4% lower. European stock markets recorded a second day of losses. The US dollar fell, while the euro climbed 0.8% against the dollar to $1.1742, and the pound rose by 0.2% to $1.346. Asia-Pacific markets showed mixed results on Wednesday. Gold prices continued to rise, exceeding $4,800 an ounce, while silver saw a slight dip. The US dollar remained stable against major currencies after an overnight drop of 0.5%.
Potential EU Responses and US Statements
Before the US tariff threat withdrawal, the suspension raised questions about potential EU retaliation. The bloc had previously announced possible tariffs on €93 billion ($109 billion, £81 billion) worth of American goods in response to earlier US tariffs. This plan had been put on hold but was set to end on February 6, meaning EU levies could come into force on February 7 without an extension or approval of the new deal. French President Emmanuel Macron urged the EU to consider retaliatory options, including the activation of the bloc's "Anti-Coercion Instrument" (ACI). The ACI, proposed in 2021 and not previously used, allows the European Commission to impose various restrictions on goods and services, including investment restrictions, lifting intellectual property protections, suspending business licenses, and outright market access bans.
US officials had advised against retaliation, with Treasury Secretary Scott Bessent urging an "open mind." Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer warned that the US would respond to any retaliation. Greer also stated that countries following US advice "tend to do okay" while "crazy things happen" otherwise. Greer also suggested that the EU had not fulfilled its commitments under the existing trade deal, including increased purchases of American agricultural and energy products. EU leaders were scheduled to convene on Thursday to discuss a coordinated response.
Trade Volume Context
The annual trade relationship between the United States and the European Union was valued at approximately $1.5 trillion in goods and services in 2024.