Will EU delay approval of trade deal with US?
What's the story
The European Parliament is reportedly planning to delay the approval of a trade deal with the US, which was agreed upon in July. The announcement is expected to be made in Strasbourg, France today. This development comes amid rising tensions between the US and Europe over President Donald Trump's attempts to acquire Greenland and his threats of new tariffs over the issue.
Market impact
Financial markets react to US-Europe trade tensions
The escalating trade tensions have rattled financial markets, with fears of a potential trade war and retaliation against the US for its trade measures. European stock markets witnessed losses for the second consecutive day yesterday. In the US, major indices also fell sharply: the Dow Jones dropped over 1.7%, S&P 500 fell more than 2%, and Nasdaq closed about 2.4% lower.
Market response
Global markets respond
The news of the trade deal suspension has sent ripples through global markets. In Asia-Pacific, major indices in Japan and Hong Kong traded slightly lower, while stocks in Hong Kong and mainland China rose marginally. The price of gold also continued its upward trend, crossing $4,800 an ounce for the first time. Precious metals are generally considered safe assets during times of uncertainty.
Currency stability
US dollar steady amid trade tensions
Despite the rising trade tensions, the US dollar remained stable against its major peers. This comes after a 0.5% drop overnight, the biggest daily fall since early December. The currency markets are closely watching these developments as they could have far-reaching implications for global trade and economic relations between the US and Europe.
Considerations
EU's response to US trade measures
The European Parliament's international trade committee has been considering whether to retaliate against the US for its trade measures. Last year, the bloc had announced a potential €93 billion worth of American products that could be targeted with levies in response to Trump's "Liberation Day" tariffs. However, that plan was put on hold while both sides finalized details of a deal.
Retaliation options
EU's potential retaliation
The deadline for the plan to be put on hold expires on February 6, after which EU levies will come into force unless an extension is sought or a new deal approved. French President Emmanuel Macron has urged the EU to consider its retaliatory options against Washington's "endless accumulation" of new tariffs. He called these measures "fundamentally unacceptable," especially when used as leverage against territorial sovereignty.