Global Markets on Alert as Europe Suspends Approval of US Trade Deal
The European Parliament is poised to suspend approval of the US trade deal established in July, according to sources from its international trade committee. This announcement is expected in Strasbourg, France, on Wednesday, marking a significant escalation in US-Europe trade tensions.
Overview of Trade Deal Developments
– The US trade deal aimed to reduce tariffs and foster cooperation between the US and Europe.
– Initially, the agreement lowered US levies on most European goods from 30% to 15%.
– In return, Europe promised to invest in the US and enhance conditions that would bolster US exports.
– Despite the agreement, final approval from the European Parliament is still pending.
Recent Escalations in Tensions
– President Donald Trump recently heightened tensions by threatening new tariffs related to Greenland, which has stirred concerns about a potential trade war.
– Influential figures in the European Parliament, such as Manfred Weber, have stated that approval is not possible at this stage due to these new threats.
– Bernd Lange, chair of the international trade committee, emphasized that the US’s coercive tactics undermine the stability of EU–US trade relations.
Market Reactions
– Financial markets reacted strongly, with both US and European stock prices declining.
– Notably:
– The Dow Jones dropped over 1.7%.
– The S&P 500 fell by more than 2%.
– The Nasdaq closed down by about 2.4%.
– Asian markets showed mixed results, with indexes in Japan and Australia slipping slightly, while shares in Hong Kong and mainland China rose.
Precious Metals and Currency Trends
– Gold prices surged, surpassing $4,800 (£3,570) an ounce, while silver dipped from record highs above $94 an ounce.
– Investors view precious metals as safer assets amid economic uncertainty.
– In currency markets, the US dollar remained stable against major peers despite a 0.5% decline overnight—the most significant drop since early December.
Potential EU Response
– The EU is considering retaliation, having previously earmarked €93 billion ($109 billion, £81 billion) of US goods for potential tariffs in response to Trump’s previous measures.
– French President Emmanuel Macron urged the bloc to explore its retaliatory options, including an anti-coercion instrument, dubbed a trade bazooka.
American Leadership’s Stance
– US Treasury Secretary Scott Bessent and other officials advise caution against European retaliation, advocating for open dialogues.
– Amidst rising frustrations over approval delays, US officials highlighted that the 27-nation EU represents one of America’s biggest trade partners, with over €1.6 trillion ($1.9 trillion, £1.4 trillion) exchanged in goods and services in 2024.
Conclusion: The Path Forward
As Europe suspends approval of the US trade deal amid growing tensions, the implications for global markets are significant. With both sides on edge, the coming weeks may reveal whether the EU chooses to retaliate, fostering an atmosphere of uncertainty that could reshape international trade dynamics. The ongoing dialogue between the US and EU will be critical as they navigate this complex landscape.
Understanding these developments is essential for stakeholders across global markets, as the interplay between US policies and European responses could have lasting consequences on international trade relations.