The European Parliament has formally suspended approval of a major US-EU trade agreement reached last summer, reigniting transatlantic trade uncertainty after renewed political tensions involving Greenland.
The decision was announced Wednesday in Strasbourg, just as Donald Trump addressed global leaders at the World Economic Forum in Davos. European lawmakers cited Trump’s recent threats of new tariffs — tied to his push for US control of Greenland — as the reason for halting progress on the deal.
From Cooperation to Confrontation
The trade agreement, finalized in July at Trump’s Turnberry golf course in Scotland, was intended to cool escalating trade tensions. Under the deal, US tariffs on most European goods were reduced to 15%, down from a previously threatened 30%. In return, Europe agreed to increased investment in the US and regulatory adjustments aimed at boosting American exports.
However, the agreement still required ratification by the European Parliament — a process that has now been paused indefinitely.
Bernd Lange, chair of the Parliament’s International Trade Committee, said lawmakers were “left with no alternative” but to suspend work on the legislation.
“Implementation will remain on hold until the US chooses cooperation over confrontation,” Lange said, adding that further progress would be impossible while tariff threats remained on the table.
Tariffs Back on the Table
The suspension reopens the door for EU retaliation. Brussels had previously announced plans to impose tariffs on up to €93bn ($109bn) worth of American goods in response to Trump’s so-called “Liberation Day” tariffs introduced last year. Those measures were temporarily paused during negotiations but are now set to take effect on 7 February unless the EU extends the delay or approves the trade deal.
Lange also raised the possibility of deploying the EU’s “anti-coercion instrument” — informally dubbed the “trade bazooka” — a position supported by French President Emmanuel Macron.
Trump Backs Down — Again?
Hours after the EU’s announcement, Trump said on social media that he had reached a “framework” understanding regarding Greenland’s future and would no longer pursue new tariffs against eight NATO allies.
Speaking to the BBC, Lange declined to say whether the development could revive the trade deal, noting that Europe would need time to assess what the framework actually meant.
In Brussels, the reaction was muted. One EU source reportedly responded with little more than an eye-rolling emoji — a reflection of growing skepticism over Trump’s follow-through on tariff threats.
Financial markets have increasingly adopted the same view, often referencing the “TACO” acronym — Trump Always Chickens Out — when reacting to the president’s policy announcements.
Markets React, Metals Surge
Trump’s Davos remarks helped calm markets after several days of volatility. US stocks rose more than 1% on Wednesday, while European markets closed modestly higher.
At the same time, gold prices surged above $4,842 an ounce for the first time, with silver hovering near record levels. Precious metals have continued to attract investors as geopolitical uncertainty persists.
A Critical Trade Relationship at Risk
The US and the 27-nation European Union remain each other’s largest trading partners, exchanging more than €1.6tn in goods and services in 2024 — nearly one-third of all global trade.
While Trump’s tariff announcements last year prompted widespread threats of retaliation, most countries ultimately chose negotiation over confrontation. Only China and Canada followed through, with Canada later rolling back most of its measures amid concerns about domestic economic damage.
In Davos, Canadian Prime Minister Mark Carney warned that smaller and mid-sized economies risk weakening their sovereignty when negotiating alone with dominant powers.
“When we only negotiate bilaterally with a hegemon, we negotiate from weakness,” Carney said.
What Comes Next?
Adding further uncertainty is a pending US Supreme Court decision on whether many of the tariffs introduced by the Trump administration last year were legally imposed.
For now, the EU-US trade deal remains in limbo — another reminder of how quickly geopolitics can derail economic cooperation in an increasingly fragmented global trade environment.
