The Agreement on Reciprocal, Fair, and Balanced Trade between the U.S. and the EU is in "limbo" and faces a potential collapse following a diplomatic crisis over Greenland.
A. Status of the Deal:
1. Ratification Halted: Following President Donald Trump’s threat on January 17, 2026, to impose new tariffs on EU nations, the European Parliament announced it would not proceed with ratification of the deal.
2. The Greenland Crisis: The trade deal was derailed after Trump threatened 10% tariffs (rising to 25% by June 2026) on eight European countries—Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Great Britain—unless a deal is reached for the U.S. to purchase Greenland.
3. European Response: The EU has summoned ambassadors for emergency meetings and is considering triggering its Anti-Coercion Instrument (the "trade bazooka"), which would allow for retaliatory restrictions on U.S. services and public tenders.
B. Key Terms of the Contested Deal:
Originally announced in July 2025 at Turnberry, Scotland, the agreement included:
1. Tariff Adjustments: European exports to the U.S. were to face a 15% tariff, while American products exported to the EU would have been cut to 0%.
2. Energy and Investment: The EU pledged to purchase $750 billion in U.S. energy and invest $600 billion in the U.S. by 2028.
3. Political Opposition: The deal was already controversial in Europe; French officials called it a "submission," and German leadership warned it would damage national finances.
C. Broader Impact:
1. Market Instability: World stock markets have braced for turbulence as the prospect of a renewed trade war looms.
2. Diversification: Seeing the U.S.-EU deal falter, other major economies like India have accelerated their own trade negotiations with the EU to diversify away from the U.S. market.
3. Internal EU Success: While U.S. relations are strained, the EU successfully finalized a landmark free trade agreement with the Mercosur bloc (South America) on January 17, 2026, after 25 years of talks.
