Trump Relaxes Greenland Tariffs, European Tensions Grow
Trump appeared confident that the European Union would continue investing in the US despite his proposed new tariffs linked to his ambition to control Greenland. He considered the European agreement "necessary" with the US, making it unlikely they would back down from their trade and investment commitments.
From the European side, European Commission President Ursula von der Leyen called the tariff threat a misstep and a potential breach of the US-EU trade agreement reached last year. In Europe, several officials began preparing retaliatory measures if the tariffs were actually implemented.
Trump announced 10% tariffs on goods from several European countries starting February 1, with the possibility of increasing to 25% in June if no agreement was reached regarding the "purchase of Greenland." When asked how far he would go, Trump simply replied: "We'll see."
This tension also "closed" the agenda of the World Economic Forum in Davos, where Trump was due to meet directly with European leaders angered by his maneuvers against the semi-autonomous Danish territory, a NATO member. Trump also downplayed criticism from European leaders, saying they typically convey a warmer message when meeting face-to-face.
On the other hand, this issue is sensitive because Trump has also mentioned that the use of military force is still a possibility, although the scenario is considered remote. From Greenland's side, its leaders stated that they need to start preparing because conflict "cannot be completely ruled out."
Markets were also swayed: the threat of tariffs and geopolitical risks fueled risk-off sentiment, depressing risk assets, boosting the dollar, and boosting demand for safe havens like gold. The situation becomes even more fragile if the two sides enter a phase of tit-for-tat tariffs.
From Washington, Treasury Secretary Scott Bessent urged trading partners not to retaliate and expressed confidence that the situation could end well if it did not escalate. He also dismissed the narrative that Europe would resort to extreme measures such as selling large amounts of US bonds.
Trump repeatedly emphasized his primary reason: the US needs to control Greenland for national security purposes and to prevent Russian-Chinese influence. He claimed that NATO would ultimately be "happy" if a deal was reached that was deemed beneficial to all parties.
5 key points:
- Trump believes the EU will continue to invest in the US despite the Greenland tariffs.
- Von der Leyen called the tariff threat wrong and a potential breach of the long-standing agreement.
- Trump is preparing a 10% tariff starting February 1, potentially increasing to 25% in June.
- Europe is drawing up countermeasures—the risk of a tariff war is growing.
- Please refrain from retaliation and consider extreme escalation unlikely. (asd)
Source: Bloomberg.com
