After President Donald Trump threatened to impose new tariffs on several European countries over Greenland, the European Union has moved toward suspending approval of a major EU–US trade agreement reached last year, deepening political and economic tensions between Washington and its long-standing allies. The dispute has unfolded against a backdrop of fragile global markets, ongoing trade uncertainty, and growing concern in Europe about the use of economic pressure linked to territorial issues involving an EU member state.
The trade agreement in question was concluded in July 2025 after months of negotiations between the United States and the European Union. The deal was reached at Trump’s Turnberry golf resort in Scotland and aimed to ease an escalating tariff confrontation that began earlier in the year. Under the agreement, US tariffs on most European goods were reduced to 15 per cent from the 30 per cent level announced by the White House in April as part of a broader tariff campaign. In return, the EU committed to increasing investment in the United States and adjusting certain trade practices to support higher levels of American exports. While the deal was politically agreed, it still required approval from the European Parliament to enter into force.
That approval process has now been interrupted following Trump’s latest statements over Greenland, a self-governing territory that is part of the Kingdom of Denmark. Over the weekend, Trump warned that the United States would impose a 10 per cent tariff from February 1 on goods imported from Denmark, Sweden, France, Germany, the Netherlands, Finland, the United Kingdom, and Norway unless Washington is allowed to acquire Greenland. The comments revived earlier tensions around Greenland, which had previously been the subject of diplomatic friction between the United States and Denmark.
Senior members of the European Parliament responded by signalling that ratification of the July trade deal would be put on hold. Sources close to the parliament’s international trade committee said approval would be suspended, with a formal announcement expected in Strasbourg. Manfred Weber, a leading figure in the European People’s Party, said that under the current circumstances, parliamentary approval was not possible. Bernd Lange, who chairs the trade committee, stated that the use of tariff threats tied to territorial issues undermines stability in transatlantic trade relations and leaves no choice but to pause work on the legislation linked to the agreement.
The European Parliament had been preparing to vote in the coming weeks on measures that would remove tariffs on US industrial goods as part of the deal. While a delay does not cancel the agreement outright, EU lawmakers said the suspension sends a clear institutional signal to Washington. Valerie Hayer, president of the centrist Renew Europe group, said the trade agreement gives the EU leverage, noting that uncertainty over access to the European market could unsettle US businesses that rely on transatlantic trade flows.
The response from European governments was swift. French Foreign Minister Jean-Noël Barrot described the tariff threat as an attempt to use customs duties as a tool of pressure to extract unjustified concessions. He said the European Commission has instruments available to respond if required, while stressing that France remains committed to security cooperation with the United States. Danish Foreign Minister Lars Løkke Rasmussen said diplomatic channels remained open and pointed out that the US political system includes checks and balances beyond the presidency.
European leaders also raised the issue at the highest political level. French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni both expressed readiness to defend Greenland, with Meloni describing the tariff threat as a mistake. EU leaders are scheduled to hold an emergency meeting in Brussels to discuss the situation and possible responses if the United States proceeds with the measures announced by Trump.
The dispute has had immediate effects on financial markets. European stock indices fell for a second straight session as investors reacted to the prospect of renewed trade conflict between two of the world’s largest economic blocs. In the United States, major equity benchmarks including the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite fell by more than one per cent in early trading before closing lower. Asian markets showed mixed movement, with losses in Japan and Australia while shares in Hong Kong and mainland China recorded gains.
Currency markets also reacted to the escalation. The euro rose by about 0.8 per cent to around $1.17, while the British pound gained modestly against the dollar. The US currency weakened against several major peers, recording its sharpest daily decline since early December. Precious metals attracted increased interest as well, with gold prices climbing above $4,800 an ounce for the first time, while silver retreated slightly after touching a record high. Market participants commonly turn to such assets during periods of trade uncertainty.
The EU has existing countermeasures prepared in the event of renewed US tariffs. Last year, Brussels approved a package of retaliatory tariffs covering about €93 billion worth of American goods in response to Trump’s earlier tariff actions. Those measures were suspended while negotiations on the July agreement were completed. The suspension is due to expire on February 6, meaning EU tariffs would take effect the following day unless an extension is granted or the trade deal receives approval. European officials confirmed that the options under consideration include extending the suspension, reinstating the tariffs, or invoking the bloc’s anti-coercion trade instrument, which allows collective action when economic pressure is applied by a third country.
The European Commission has so far refrained from announcing specific steps, stating only that it is assessing developments and remains in contact with member states. Officials stressed that any response would follow established EU procedures and legal frameworks. The Greenland issue has complicated matters because it directly involves the sovereignty of Denmark, an EU member state, placing the dispute beyond a standard trade disagreement.
From Washington, senior US officials warned against European retaliation. Speaking at the World Economic Forum in Davos, US Treasury Secretary Scott Bessent urged European leaders to avoid immediate countermeasures and to allow space for dialogue. He said the administration’s position would be communicated directly by the president. Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer also cautioned that any EU response would be met with further action. Greer said past experience showed that countries that followed US guidance tended to fare better than those that did not.
The United States has previously expressed frustration with the pace of European parliamentary procedures required to approve the July agreement. Differences over metals tariffs and technology-related trade issues had already delayed progress, even before the Greenland dispute emerged. US officials had indicated that prolonged uncertainty could affect broader economic relations.
The economic stakes are considerable. The United States and the European Union are each other’s largest trade partners, with goods and services trade exceeding €1.6 trillion in 2024, according to EU data. That figure accounts for nearly one-third of global trade flows. Many companies on both sides of the Atlantic rely on stable tariff conditions and predictable market access, making prolonged uncertainty a concern for exporters, manufacturers, and investors.
