Greenland controversy escalates: European Parliament freezes US-EU agreement, crypto market plunges into risk aversion

On January 21st local time, European Parliament International Trade Committee Chair Lang announced that the review of the EU-U.S. trade agreement will be indefinitely frozen. This decision marks an escalation of the US-EU trade conflict from verbal confrontation to institutional level. Against the backdrop of Trump threatening to impose tariffs to acquire Greenland, the European Parliament chose to respond by freezing the agreement. Meanwhile, global market risk appetite has significantly declined, safe-haven sentiment has increased, and risk assets such as Bitcoin have come under pressure.

The Escalation Path of the US-EU Trade Conflict

From Threats to Countermeasures

The Trump administration’s pressure strategy is quite direct. According to the latest news, Trump announced that starting February 1st, tariffs of 10% will be imposed on eight European countries opposing U.S. control of Greenland, with plans to increase to 25% on June 1st. The targeted countries include Denmark, France, Germany, and other major European nations.

Europe’s response has been equally firm. When announcing the freeze on the agreement review, Lang stated that the EU’s sovereignty and territorial integrity are currently under threat, and under such circumstances, normal work cannot proceed. This is not just a diplomatic phrase but a concrete action by the European Parliament—suspending the approval process of the US-EU trade agreement reached last July.

The Substance and Scale of the Conflict

The economic scale of this conflict is not negligible. According to data from analysis agencies, the bilateral annual trade volume of goods between the US and EU is approximately $650 billion to $700 billion. If the 25% tariffs are actually implemented, it will have a substantial impact on both economies. The EU has indicated it is prepared with countermeasures, including possibly imposing tariffs on American goods.

Global Market Safe-Haven Shift

Rapid Decline in Risk Appetite

The US-EU trade conflict is not an isolated event. Under the dual pressures of soaring Japanese government bond yields and geopolitical tensions in Europe and America, global markets have shifted into a clear safe-haven mode.

The abnormal movement in Japan’s market is particularly noteworthy. The yield on Japan’s 10-year government bonds has risen to about 2.29%, reaching a new high since 1999. This figure may seem modest, but it reflects deep concerns about Japan’s fiscal sustainability. Japan’s government debt exceeds 240% of GDP, with total debt approaching 1342 trillion yen, and it is projected that by 2026, debt interest payments will account for about a quarter of fiscal expenditures. This fiscal fragility has spillover effects on global bond markets.

Crypto Market Under Pressure

In this context, Bitcoin’s performance has been disappointing. Although it previously rebounded near $97,000, under the dual pressures of declining risk appetite and tightening liquidity, Bitcoin failed to sustain upward momentum and ultimately fell below $90,000.

This highlights an important market reality: Bitcoin, in the current environment, has not played the role of a traditional safe-haven asset. Instead, it exhibits characteristics of high-beta risk assets, being highly sensitive to interest rates, geopolitical tensions, and cross-market volatility. In contrast, gold prices have hit record highs, better meeting market safe-haven needs.

The Market’s Passive Response Mode

Uncertainty in Liquidity and Policy Signals

In the current environment of unclear policy signals, the crypto market may maintain a passive response rather than a trend-driven movement. Investors’ focus has shifted from seeking returns to capital preservation, and they are increasingly alert to systemic risks that policy missteps could trigger.

This shift is reflected in several aspects:

• Risk assets are generally under pressure, with major US stock indices all declining
• Capital flows into defensive assets, with gold, government bonds, and other safe-haven instruments in high demand
• The US dollar index has fallen, but this has not driven Bitcoin higher
• Volatility index VIX has risen to high levels, indicating significant market panic sentiment

Future Focus

The direction of this US-EU trade conflict will directly influence market sentiment. If negotiations reach a deadlock and tariff threats are actually implemented, risk asset prices could further decline. Conversely, if signs of easing emerge, the crypto market may see a rebound opportunity. However, in the current environment of tightening liquidity, any rebound may face pressure.

Additionally, factors such as the stability of Japan’s bond market, the specific measures of the EU’s countermeasures, and subsequent US policy adjustments will be key variables affecting the crypto market.

Summary

The European Parliament’s indefinite freeze on the review of the US-EU trade agreement signifies an escalation of the conflict from diplomatic to institutional level. Coupled with shocks in Japan’s bond market, this has driven global markets into a clear safe-haven mode. Bitcoin has failed to serve as a hedge and has come under pressure due to declining risk appetite. The core features of the current market are liquidity tightening and policy uncertainty, with crypto assets showing high sensitivity to risk. Investors should closely monitor the progress of US-EU negotiations and changes in global liquidity, as these will directly impact the subsequent market trajectory.