Suspension of US Tariffs Deal by Europe Signals Escalating Trade Tensions

Tue Jan 20 2026 22:29:13 GMT+0200 (Eastern European Standard Time)

The European Parliament is set to suspend the approval of a newly agreed US tariffs deal due to rising tensions, particularly following US threats over Greenland. This decision may signal increased volatility in transatlantic trade relations.

The European Parliament plans to announce the suspension of the US tariffs deal, heightening trade tensions between Europe and the United States. This decision arises after recent threats from the US concerning Greenland, reviving fears of a potential trade war. Stock markets on both sides of the Atlantic reacted negatively, and the future of the agreement remains uncertain as the EU considers its options ahead of the impending tariffs.

The European Parliament is planning to suspend approval of the US tariffs deal agreed in July, according to sources close to its international trade committee.

The suspension is set to be announced in Strasbourg, France on Wednesday.

The move would mark another escalation in tensions between the US and Europe, as Donald Trump ratchets up his efforts to acquire Greenland, threatening new tariffs over the issue on the weekend.

The stand-off has rattled financial markets, reviving talk of a trade war and the possibility of retaliation against the US for its trade measures.

Shares on both sides of the Atlantic were lower on Tuesday, with European stock markets seeing a second day of losses and the three main US stock indices down by more than 1% in morning trading.

On the currency markets, the US dollar also fell sharply. The euro climbed 0.8% against dollar to $1.1742 while the pound rose by 0.2% to $1.346.

Borrowing costs also rippled higher around the world, as the biggest sell-off of long-term government debt in months drove up yields on 30-year bonds in markets including the US, UK and Germany.

Trade tensions between the US and Europe had eased since the two sides struck a deal at Trump's Turnberry golf course in Scotland in July. That agreement set US levies on European goods at 15%, down from the 30% Trump had initially threatened as part of his 'Liberation Day' wave of tariffs in April. In exchange, Europe had agreed to invest in the US and make changes on the continent expected to boost US exports.

The deal still needs approval from the European Parliament to become official.

But on Saturday, within hours of Trump's threat of US tariffs over Greenland, Manfred Weber, an influential German member of European Parliament, stated that 'approval is not possible at this stage.'

The EU had put on hold plans to retaliate against the US tariffs with its own package targeting €93bn ($109bn, £81bn) worth of American goods while the two sides finalised the details.

However, that reprieve ends on 6 February, meaning EU levies will come into force on 7 February unless the bloc moves for an extension or approves the new deal.

Speaking at the World Economic Forum in Davos, US Treasury Secretary Scott Bessent reiterated his warning to European leaders against retaliation, urging them to 'have an open mind'.

'I tell everyone, sit back. Take a deep breath. Do not retaliate. The president will be here tomorrow, and he will get his message across,' he said.

The US has previously expressed impatience with European progress toward approval of the deal amid ongoing disagreements over tech and metals tariffs.

The US and the 27-nation European Union are each others' single biggest trade partners, with more than €1.6tn ($1.9tn, £1.4tn) in goods and services exchanged in 2024, according to European figures. That represents nearly a third of all global trade.

As tensions escalate, the possibility of a trade war looms, exacerbating fears of economic disruption across Europe and the US.