The European Parliament is considering suspending approval of the deal on US tariffs reached in July, according to sources close to its international trade committee.
The suspension is expected to be announced Wednesday in Strasbourg, France.
The move would mark a further escalation of tensions between the United States and Europe, as Donald Trump steps up his efforts to acquire Greenland, threatening new tariffs over the issue this weekend.
The standoff has roiled financial markets, reigniting talk of a trade war and the possibility of retaliation against the United States for its trade measures.
Stocks on both sides of the Atlantic were lower on Tuesday, with European stock markets seeing a second day of losses and all three major U.S. stock indexes down more than 1% in morning trading.
On the foreign exchange markets, the US dollar also fell sharply. The euro climbed 0.8% against the dollar to $1.1742 while the pound sterling rose 0.2% to $1.346.
Trade tensions between the United States and Europe have eased since the two sides reached a deal at Trump’s golf course in Scotland in July.
This agreement set US levies on European products at 15%, down from the 30% that Trump had initially threatened as part of his “Liberation Day“Wave of customs duties in April. In exchange, Europe agreed to invest in the United States and make changes on the continent that should boost American exports.
The deal still needs to be approved by the European Parliament to become official.
But on Saturday, hours after Trump threatened US tariffs on Greenland, Manfred Weber, an influential German lawmaker in the European Parliament, said “approval is not possible at this stage.”
The EU had suspended plans to retaliate against US tariffs with its own plan targeting 93 billion euros ($109 billion, £81 billion) of US goods while the two sides negotiated.
But that reprieve ends on February 6, meaning the EU levies will take effect on February 7 unless the bloc requests an extension or approves the new deal.