The European Parliament could announce on Wednesday the suspension of the trade agreement with the US from July

Global markets are on alert as Europe suspends approval of the trade deal with the US, the BBC writes

The European Parliament plans to suspend approval of the trade deal with the US concluded in July, according to sources close to its committee on international trade.

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

The move would mark a further escalation of tensions between the US and Europe as Donald Trump steps up his efforts to acquire Greenland, threatening new tariffs.

The standoff rattled financial markets, reigniting talk of a trade war and the possibility of retaliation against the US over its trade measures.

Stocks on both sides of the Atlantic were lower on Tuesday, with European stock markets posting a second day of losses. In the US, the Dow Jones fell more than 1.7%, while the S&P 500 fell more than 2% and the Nasdaq closed down about 2.4%.

Stock markets in the Asia-Pacific region were mixed on Wednesday, with major indexes in Japan and Australia slightly lower, while stocks in Hong Kong and mainland China rose.

The price of gold continued to rise, surpassing $4,800 (£3,570) an ounce for the first time. The price of silver fell from a record high of over $94 an ounce.

Precious metals are considered safer assets to hold in times of uncertainty, and the prices of both gold and silver have skyrocketed over the past year.

In currency markets, the US dollar held steady against its main rivals, falling 0.5% overnight – its biggest daily decline since early December.

Trade tensions between the US and Europe have eased since the two sides reached an agreement at Trump's Turnberry golf course in Scotland in July.

That deal set U.S. tariffs on most European goods at 15 percent, down from the 30 percent Trump had initially threatened as part of his “Deliverance Day” wave of tariffs in April. In return, Europe has agreed to invest in the US and make changes on the continent that are expected to boost US exports.

The agreement still needs the approval of the European Parliament to become official.

But on Saturday, hours after Trump threatened US tariffs on Greenland, Manfred Weber, an influential German member of the European Parliament, said “approval is not possible at the moment”.

And Bernd Lange, who chairs the European Parliament's international trade committee, said there was “no alternative” but to suspend the deal because of threats over Greenland.

“By threatening the territorial integrity and sovereignty of an EU member state and using tariffs as a coercive tool, the US is undermining the stability and predictability of EU-US trade relations,” said Lange, whose committee must sign off on the deal before it goes to parliament for a final vote.

“There is no alternative but to suspend work on the two Turnberry legislative proposals until the US decides to return to a path of cooperation rather than confrontation, and before any further action is taken.”

The decision raises questions about whether the EU will follow through with threats of retaliation against the US.

The EU bloc last year announced 93 billion euros worth of US goods could be hit by tariffs in response to Trump's “Liberation Day” tariffs before suspending the plan while the two sides finalized the details of a deal.

But that delay ends on February 6, meaning the EU taxes will come into force on February 7, unless the EU bloc asks for an extension or approves the new deal.

French President Emmanuel Macron is among those urging the EU to consider its options for retaliation, including the counter-coercive tool dubbed the “commercial bazooka”.

Washington's “endless accumulation” of new tariffs is “fundamentally unacceptable, even more so when they are used as leverage against territorial sovereignty,” he said in a speech at the World Economic Forum in Davos.

The American answer

Also speaking in Davos, US Treasury Secretary Scott Bessent reiterated his warning to European leaders about retaliation, urging them to “keep an open mind”.

“I'm telling everyone, stay calm. Take a deep breath. Don't fight back. The president will be here tomorrow and deliver his message,” he said.

Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer warned that the US would not let the retaliation go unanswered.

“What I've found is that when countries follow my advice, they tend to do well. When they don't, crazy things happen,” Greer said in remarks reported by Agence France-Presse.

The US has previously expressed impatience with European progress towards approving the deal amid ongoing disagreements over tariffs on technology and metals.

The US and the 27-nation European Union are each other's biggest trading partners, with trade of more than 1.6 trillion euros ($1.9 trillion, £1.4 trillion) in goods and services in 2024, according to European figures. This represents almost a third of all global trade.

When Trump began announcing tariffs last year, it sparked threats of retaliation from many political leaders, including in Europe.

In the end, however, many opted for negotiations instead.

Only China and Canada have kept up their threats to impose tariffs on American goods, with Canada quietly withdrawing most of those measures in September, worried they were hurting the Canadian economy.

In a speech in Davos on Tuesday, Canadian Prime Minister Mark Carney urged the “middle powers” to unite to oppose the rivalry between the great powers, a world of “what makes justice” that he warned was emerging.

“When we negotiate only bilaterally with a hegemon, we negotiate out of weakness. We accept what we are offered. We compete with each other to be the most accommodating,” he warned. “That is not sovereignty. It is the exercise of sovereignty while accepting subordination.”

Against the backdrop of trade tensions looms a Supreme Court decision on the legality of many of the tariffs announced by Trump last year.