US-EU trade deal frozen as Greenland dispute fuels transatlantic tensions

STRASBOURG, France — The European Parliament suspended the ratification of a major trade agreement with the United States on Wednesday, citing a protest against President Donald Trump’s demand to purchase Greenland from Denmark.

The move significantly escalates transatlantic tensions following Trump’s repeated threats to impose tariffs on European nations to gain control of the territory. Bernd Lange, chairman of the European Parliament’s Committee on International Trade, announced that work on the deal would remain paused until the U.S. returns to a "path of cooperation."

Lange warned that the president’s actions "threaten the territorial integrity and sovereignty of an EU member state." He also signaled that the European Union is considering retaliatory measures in response to the pressure.

Financial markets initially dipped on the news but recovered after President Trump pledged not to use force to acquire the island.

Speaking from Davos, U.S. Treasury Secretary Scott Bessent urged European leaders to refrain from further retaliation.

The European Parliament’s suspension of the trade agreement represents far more than a mere procedural delay. By explicitly conditioning an economic pact on sovereignty and territorial integrity—a fundamental red line for Brussels—the bloc has signaled a significant pivot in its foreign policy. This move highlights an increasingly assertive European Union, one now prepared to weaponize its economic leverage as a strategic tool, marking a departure from its traditional, consensus-based approach to diplomacy.

The collapse of the deal underscores the profound fragility of the transatlantic relationship under the Trump administration. That an agreement finalized only months ago can be derailed by sudden geopolitical friction points to a systemic breakdown of trust between historic allies. President Trump’s brand of transactional and unpredictable diplomacy is increasingly cornering traditional partners, compelling them to adopt hardline stances they would typically seek to avoid.

While equity markets have shown resilience, this optimism may be misplaced. The specter of a full-scale trade war remains a primary concern, particularly as the February 7 deadline for EU retaliatory measures looms. The fundamental risk is not necessarily military escalation, but the fact that trade disputes have now become inextricably linked to national security and sovereignty. This entanglement makes a diplomatic off-ramp significantly harder to navigate. A sustained tariff conflict between the world’s two largest economic powers would have severe global repercussions, threatening the integrity of international supply chains and eroding long-term investor confidence.

An all-out trade war between the United States and Europe could spark an economic recession, creating a ripple effect that hits the Vietnamese-American community particularly hard. A downturn would stifle consumer spending, directly impacting the bottom lines of our small businesses—from the nail salon industry to the phở restaurants and service shops that define Little Saigon. Furthermore, a struggling U.S. economy often leads to a decrease in remittances, threatening the financial lifeline many families provide to their loved ones in Vietnam.