EU May Pause US Trade Deal Approval Amid Trump Tariff Turmoil

The European Parliament’s trade chief has proposed suspending the ratification process of the European Union’s (EU) trade agreement with the United States (US), citing uncertainty over Washington’s trade policy.

Bernd Lange, chairman of the Parliament’s trade committee, said he will propose freezing legislative work on approving the so-called Turnberry Agreement at an emergency meeting until there is a comprehensive legal assessment and clear commitments from the Trump administration.

Lange criticised what he described as “customs chaos” in US policy, pointing to unanswered questions and growing uncertainty for the EU and other US trading partners.

What Triggered The Shift In Stance?

The move comes after the US Supreme Court struck down President Donald Trump’s use of an emergency-powers law to impose reciprocal tariffs globally.

The parliamentary committee had previously paused the approval process after Trump threatened to annex Greenland, reflecting earlier tensions.

Following the ruling, Trump said he would introduce a 10% global tariff, later stating he would raise it to 15%, adding to uncertainty around US trade policy.

The new tariffs proposed by Trump will presumably take the form of relying on the 1974 Trade Act Section 122, which will provide the president with 150 days to institute tariffs without the council's consent.

With policy signals shifting rapidly, the EU is reevaluating the future of the agreement, and it might get delayed or renegotiated unless there is a sense of clarity.

What Does The EU–US Trade Deal Contain?

The agreement reached last summer between Trump and European Commission President Ursula von der Leyen would:

• Impose a 15% tariff on most EU exports to the US.

• Remove tariffs on American goods entering the EU.

• Maintain a 50% US tariff on European steel and aluminium.

The EU had agreed to the deal to avoid a broader trade war and preserve US security backing, particularly regarding Ukraine. The Parliament had initially targeted ratification by March.

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What Does This Mean For Investors?

Uncertainty around the EU–US trade agreement adds volatility to global trade flows. Any disruption or delay in ratification could impact global demand, especially in sectors linked to exports, metals, automobiles, and commodities.

Since the EU is a major trading partner of both the US and India, shifts in tariff structures may alter global supply chains and pricing dynamics.

Movements in currency price, commodity prices and investor risk appetite could have an indirect effect on Indian markets. Export-driven industries, such as IT services, pharmaceuticals, auto parts, and engineering products, can be sensitive to changes in global trade.

Investors need to watch the risk of tensions escalating into trade friction, as this would have an impact on capital flows and the market sentiment in the emerging economies, such as India.

Sources

Bloomberg

Business Line