The European Parliament is planning to suspend approval of the US tariffs deal agreed in July, according to sources close to its international trade committee.
The suspension is set to be announced in Strasbourg, France on Wednesday.
The move would mark another escalation in tensions between the US and Europe, as Donald Trump ratchets up his efforts to acquire Greenland, threatening new tariffs over the issue on the weekend.
The stand-off has rattled financial markets, reviving talk of a trade war and the possibility of retaliation against the US for its trade measures.
Shares on both sides of the Atlantic were lower on Tuesday, with European stock markets seeing a second day of losses. In the US, the Dow Jones was down 1.3% in midday trading, while the S&P 500 dropped 1.5% and the Nasdaq was 1.7% lower.
On the currency markets, the US dollar also fell sharply. The euro climbed 0.7% against the dollar to $1.1731 while the pound rose by 0.2% to $1.346.
Borrowing costs also rippled higher around the world, as the biggest sell-off of long-term government debt in months drove up yields on 30-year bonds in markets including the US, UK and Germany.
Trade tensions between the US and Europe had eased since the two sides struck a deal at Trump’s Turnberry golf course in Scotland in July.
That agreement set US levies on European goods at 15%, down from the 30% Trump had initially threatened as part of his “Liberation Day” wave of tariffs in April. In exchange, Europe had agreed to invest in the US and make changes at on the continent expected to boost US exports.
The deal still needs approval from the European Parliament to become official.
But on Saturday, within hours of Trump’s threat of US tariffs over Greenland, Manfred Weber, an influential German member of European Parliament, said “approval is not possible at this stage”.
The EU had put on hold plans to retaliate against the US tariffs with its own package targeting €93bn ($109bn, £81bn) worth of American goods while the two sides finalised the details.
But that reprieve ends on 6 February, meaning EU levies will come into force on 7 February unless the bloc moves for an extension or approves the new deal.
French President Emmanuel Macron was among those urging the EU to consider its retaliatory options, including the anti-coercion instrument, nicknamed a “trade bazooka”.
Washington’s “endless accumulation” of new tariffs is “fundamentally unacceptable, even more so when they are used as leverage against territorial sovereignty,” he said in a speech at the World Economic Forum in Davos.
