Markets Shrug After EU Freezes US Trade Deal Approval (Over Greenland Threat)
US equity markets are testing the highs of the day, completely ignoring the headlines coming from Europe that the European Parliament decided to freeze a ratification vote in response to President Donald Trump’s escalating threats to seize Greenland.
Despite President Trump walking back his most vociferous rhetoric during his lengthy speech at Davos...
Trump began the Greenland portion of his speech by calling for "immediate negotiations" to acquire the Arctic territory, mocking Denmark for losing it "in six hours" during World War II.
But he also signaled it was time for de-escalation with NATO, dismissing fears that the U.S. military would attack its own allies.
Trump said that if the U.S. decided to take Greenland by force it would be "unstoppable," but "I don't want to use force. I won't use force. All the United States is asking for is a place called Greenland."
...the EU Parliament’s trade committee postponed the vote indefinitely on Wednesday, casting doubt on whether the pact will ever get across the finish line.
“By threatening the territorial integrity and sovereignty of an EU member state and by using tariffs as a coercive instrument, the US is undermining the stability and predictability of EU-US trade relations,” said Bernd Lange, chair of Parliament’s trade committee, in a statement.
“We have been left with no alternative but to suspend work” on the trade deal, Lange added, “until the US decides to reengage on a path of cooperation rather than confrontation.”
Trump's actions (and now Europe's) have pushed the trade policy uncertainty index up dramatically (but well off Liberation Day highs)...
...and stocks could not care less (with Small Caps having now erased all the Greenland drama losses)...
Certainly seems that the market's focus was on the possibility of kinetic action and not just a 'disagreement' over Greenland per se.
Wednesday’s decision was expected after senior lawmakers from Parliament’s largest political groups proposed a delay on Saturday, following Trump’s tariff announcement.
Manfred Weber, leader of Parliament’s largest group, the center-right European People’s Party, said on Wednesday that “for us as EPP, and I think for all parliamentarians, it’s clear there will be no ratification, no zero percentage tariffs access to the EU for US products until we have clarified the question of reliability.”
“Europe prefers dialogue and solutions — but we are fully prepared to act, if necessary, with unity, urgency and determination,” European Commission President Ursula von der Leyen, the EU’s top executive, told EU lawmakers on Wednesday morning.
Additionally, Politico confirms earlier reports that Germany has joined France in saying it will ask the Commission to explore unleashing the Anti-Coercion Instrument at the emergency EU leaders' summit in Brussels on Thursday evening if Trump doesn’t walk back his Greenland threats (which he just did?).
Much to the Europeans' chagrin (who appear to have taken their decision before Trump's speech de-escalated the very things that they feared), we suspect Trump will not take any action to appease them to get the trade deal done unless and until the market 'demands' it.