The European Parliament plans to suspend approval of the US tariff deal agreed in July, according to sources close to the international trade committee.
The suspension is scheduled to be announced in Strasbourg, France on Wednesday.
The move will mark another escalation of tensions between the US and Europe, as Donald Trump steps up his efforts to annex Greenland, threatening new tariffs on the issue over the weekend.
The stand-off shocked financial markets, reviving talk of a trade war and the possibility of retaliation against the US for trade measures.
Shares on both sides of the Atlantic were lower on Tuesday, with European stock markets seeing a second day of losses and the three main US stock indexes falling more than 1% in morning trading.
In currency markets, the US dollar also fell sharply. The euro rose 0.8% against the dollar to $1.1742 while the pound rose 0.2% to $1.346.
Trade tensions between the US and Europe have eased since the two sides held talks on Trump’s golf course in Scotland in July.
That agreement sets US tariffs on European goods at 15%, down from the 30% that Trump initially threatened as part of his “Independence Day” wave of tariffs in April. In return, Europe agreed to invest in the US and make changes on the continent that are expected to boost US exports.
The agreement still needs approval from the European Parliament to become official.
But on Saturday, within hours of Trump’s threat of US tariffs on Greenland, Manfred Weber, an influential German member of the European Parliament, said that “approval is not possible at this stage”.
The EU has put on hold plans to retaliate against US tariffs with its own package targeting €93bn ($109bn, £81bn) worth of American goods as the two sides negotiate.
But that reprieve expires on February 6, meaning EU tariffs will start on February 7 unless the bloc moves for an extension or approves a new deal.