The United States' campaign to own Greenland has prompted the European Union to suspend approval of the trade deal it agreed with Washington back in July.

The move is being seen as a ratcheting up of tension between the US and Europe and follows President Donald Trump's assertions that his country will take over the Arctic island by whatever means necessary, and his announcement that eight European nations that have stood in his way will be hit with new 10 percent tariffs.

The suspension of the trade deal alongside threats from some EU leaders to respond to Trump's new tariffs with tariffs of their own have stoked fears a full trade war could be around the corner, and impacted financial markets.

European stock markets recorded a second day of losses on Tuesday and there were also slides in the US, where the Dow Jones closed down more than 1.7 percent, the S&P 500 closed more than 2 percent down, and Nasdaq was 2.4 percent lower.

The EU-US trade deal, which is awaiting approval from the European Parliament, calls for EU exports to be taxed in the US at 15 percent, and for Europe to invest in the US and be more welcoming of US products, and was widely seen as US-friendly.

But the BBC quoted Manfred Weber, an influential German member of the European Parliament, saying "approval is not possible at this stage".

And Bernd Lange, who chairs the European Parliament's committee on international trade, said the bloc has "no alternative", other than to suspend it because of Trump's threats to EU member Denmark, which owns mineral-rich Greenland.

"By threatening the territorial integrity and sovereignty of an EU member state and by using tariffs as a coercive instrument, the US undermines the stability and predictability of EU-US trade relations," said Lange, whose committee must sign off on the deal before it can be debated by parliament. He said there can be no prospect of that, unless Trump "decides to re-engage on a path of cooperation, rather than confrontation".

The US, meanwhile, has told the EU not to fight back and US Trade Representative Jamieson Greer told Agence France-Presse the bloc should pay attention, adding: "What I've found is that when countries follow my advice, they tend to do okay. When they don't, crazy things happen."

The US is the 27-nation EU's largest trading partner and the EU is the US' largest trading partner, with more than $1.9 trillion of goods and services flowing between them in 2024, according to EU figures, which say that amounts to a third of global trade.

With the fate of the EU-US trade deal unclear, proposed EU tariffs on $109 billion of US products that were shelved because of the trade deal could come into force in February.