A fragile EU–U.S. trade deal is under strain following U.S. President Donald Trump’s tariff threats over Greenland. European leaders are now forced to weigh up not only their immediate response but also what a deeper trade confrontation could entail.
Tensions intensified after the European Parliament (EP) signalled it was preparing to suspend approval of the deal. On Wednesday (21 January) the Parliament, the European Union's legislative body, suspended work on the deal:
"Given the continued and escalating threats, including tariff threats, against Greenland and Denmark, and their European allies, we have been left with no alternative but to suspend work" on the agreement, said Bernd Lange, the chairman of the EP's Committee on International Trade.
What was agreed?
Trump and European Commission President Ursula von der Leyen reached the agreement setting new terms for EU–U.S. trade on 27 July 2025, describing it as the first step towards a broader, long-term framework.
The deal was intended to restore stability and predictability for businesses, secure EU access to the U.S. market, protect integrated value chains and jobs, and deepen cooperation on economic security and supply chains.
Both sides agreed to coordinate on steel, aluminium and copper overcapacity, reduce tariffs through quotas, and lower non-tariff barriers. A U.S. tariff ceiling of 15 percent was agreed for "most EU exports."
Trump tariff threat
However, the deal was tested within months, with Trump linking trade relations to a broader geopolitical dispute over Greenland.
Trump has warned the trade truce could unravel, saying the U.S. could impose escalating tariffs unless it is allowed to buy Greenland, home to about 57,000 people.
He said the measures could take effect from 1 February, naming EU members Denmark, Sweden, France, Germany, the Netherlands and Finland, as well as the UK and Norway.
Trump initially declined to say whether he would use force to seize Greenland, but dismissed the presence of NATO allies on the island, saying “that wasn’t a military” and that “they sent a few people… to guard against Russia.”
European leaders rejected his position. Denmark’s Foreign Minister Lars Løkke Rasmussen said: “We are living in 2026. You can trade with people, but you don’t trade people.”
Greenland’s Prime Minister Jens-Frederik Nielsen said the territory must decide its own future, adding: “We will not let ourselves be pressured. We stand firm on dialogue, on respect and on international law.”
EU leaders are due to discuss next steps on Greenland at an emergency summit in Brussels on Thursday (22 January). Any decision will require consensus among the bloc’s 27 member states — a process that can be politically slow and complex.
One option remains a package of tariffs on €93 billion ($109 billion) worth of U.S. imports, announced last year in response to Trump’s 'Liberation Day' tariffs, but put on hold during negotiations.
That reprieve expires on 6 February 2026, meaning EU levies could take effect the following day unless extended or replaced by approval of the deal.
Another option, being pushed by French President, Emmanuel Macron, is the Anti-Coercion Instrument (ACI). It has never been used and could restrict access to public tenders, investments or banking activity, or limit trade in services — an area where the U.S. runs a surplus with the EU, including in digital services. The instrument is designed to respond to economic pressure only as a last resort.
Macron has urged the EU to consider its retaliatory tools, saying Washington’s “endless accumulation” of tariffs was “fundamentally unacceptable,” especially when used as leverage against territorial sovereignty.
If tensions escalate further, the EU has a defined, but tightly constrained, set of tools under the ACI. It allows restrictions on imports and exports of goods and services, as well as measures affecting intellectual property rights and foreign direct investment. It could also limit access to the EU market - including public procurement - tighten chemical and sanitary rules, or restrict access to EU funding.
In theory, retaliation could target politically-sensitive pressure points. These range from U.S. products closely associated with Republican states, such as Kentucky bourbon, to sectors aligned with Trump’s support base, including crypto and Silicon Valley.
Other potential levers include areas the U.S. relies on abroad. For example, insulin imports from Denmark, or European-made weight-loss drugs like Ozempic and Wegovy, though EU officials have cautioned that such measures would be highly sensitive and politically difficult.
Speaking at the World Economic Forum in Davos, European Commission President Ursula von der Leyen framed the moment as part of a broader shift in global trade, warning that “geopolitical shocks can and must serve as an opportunity for Europe” and calling it “a necessity to build a new form of European independence.”
She said Europe was choosing “fair trade over tariffs, partnership over isolation,” while remaining committed to “de-risking our economies and diversifying our supply chains.”
Despite the range of options, EU diplomats say political appetite for aggressive retaliation remains limited, with most member states wary of triggering a full-scale trade war and preferring targeted, proportionate and temporary measures, particularly given the need for consensus among the bloc’s 27 members.
Uzbekistan and Azerbaijan are drawing up a new programme aimed at boosting bilateral trade to $1 billion by 2030, as the two countries move to deep...
Australia on Thursday condemned Israel’s decision to close its criminal investigation into the deaths of Australian aid worker Zomi Frankcom ...
Shipping traffic through the Strait of Hormuz remains limited on Thursday, with no increase in vessel crossings as U.S.-Iran talks to res...
The collective-defence agreement between Türkiye, Saudi Arabia and Pakistan signals that regional powers no longer want to rely solely on external security guarantees. Whether it becomes a stabilising deterrent or another axis of rivalry remains unresolved.
Shipping through the Strait of Hormuz has slowed, according to the latest data, as uncertainty over the waterway’s reopening kept most shipowners away. Six commodity vessels crossed the strait on Tuesday, down from nine the day before and below the 10-day daily average of 11.
Shipping traffic through the Strait of Hormuz remains limited on Thursday, with no increase in vessel crossings as U.S.-Iran talks to resolve the conflict remained stalled. Nine commodity vessels transited the key waterway on Wednesday, unchanged from the previous day, according to Kpler data.
Iran has said the Strait of Hormuz will remain closed until the U.S. fulfils the terms of an interim deal, including lifting the maritime blockade and sanctions and releasing Iran’s frozen assets.
Start your day informed with AnewZ Morning Brief. Here are the top news stories for the 19th of August, covering the latest developments.
Australia on Thursday condemned Israel’s decision to close its criminal investigation into the deaths of Australian aid worker Zomi Frankcom and six World Central Kitchen colleagues killed in Gaza in April 2024.
Shipping traffic through the Strait of Hormuz remains limited on Thursday, with no increase in vessel crossings as U.S.-Iran talks to resolve the conflict remained stalled. Nine commodity vessels transited the key waterway on Wednesday, unchanged from the previous day, according to Kpler data.
North Korea has fired more than 10 short-range ballistic missiles after U.S. President Donald Trump reduced American participation in joint military exercises with South Korea in an effort to revive dialogue with Pyongyang.
Georgia’s foreign trade data for January-July 2026 shows Kyrgyzstan, China and Russia as its top three export markets, highlighting its Middle Corridor ambitions and complex economic ties with Moscow.
Kazakhstan will vote on 23 August in its first parliamentary election under the new Constitution, choosing 145 members of the new Kurultai under a fundamentally changed electoral system based entirely on party lists.
You can download the AnewZ application from Play Store and the App Store.
What is your opinion on this topic?
Leave the first comment