The European Parliament is poised to suspend the approval process for a US trade deal made in July. This decision is expected to be announced soon in Strasbourg, France.
This move heightens the ongoing tensions between the US and Europe. Recently, former President Donald Trump’s aim to acquire Greenland has led to threats of new tariffs, stirring concerns of a potential trade war.
Markets are reacting nervously. European stocks have taken a hit, with the Dow Jones in the US dropping over 1.7%, and the S&P 500 and Nasdaq also seeing significant losses.
In Asia, the picture is mixed. While some markets in Japan and Australia are down, shares in Hong Kong and mainland China are rising. Amid this uncertainty, gold prices have surged to new heights, exceeding $4,800 an ounce, as investors seek safer assets.
Just months ago, the US and Europe seemed to have found common ground with a deal that lowered US tariffs on European goods from 30% to 15%. But the recent tensions have jeopardized this agreement. Manfred Weber, a prominent German MEP, indicated that approval of the deal is off the table for now, pointing to the detrimental impact of the US’s recent threats.
Experts argue that a stable trade relationship is crucial for both parties. Bernd Lange, chair of the European Parliament’s trade committee, emphasized the need for the US to shift from confrontation to cooperation. He noted that the use of tariffs as threats only undermines trust in transatlantic trade.
This situation raises questions about whether the EU will retaliate. Previously, the bloc had suggested tariffs on up to €93 billion ($109 billion) worth of US goods as a response to American measures. French President Emmanuel Macron shared insights at the World Economic Forum, advocating for careful consideration of such options.
In Davos, US Treasury Secretary Scott Bessent warned European leaders against retaliation, suggesting a united approach would be more beneficial. He encouraged dialogue, stating, “sit back, take a deep breath.”
The US and EU trade relationship is vital, with over €1.6 trillion ($1.9 trillion) in goods and services exchanged in 2024, making it one of the largest trade partnerships globally. Many countries have faced similar dilemmas in the past when dealing with the US regarding tariffs, with instances of negotiation often prevailing over outright retaliation.
As tensions simmer, the future of this trade deal hangs in the balance, highlighting the complexity of international relations and economic dependencies in today’s world.
