When Donald Trump arrives at Davos later this week he’s likely to receive a frosty reception from European leaders now scrambling to decide a response to his threat to impose tariffs on European, UK and Nordic economies unless they deliver Greenland to the US.
His announcement – not an official White House announcement, but a social media posting – that the US would impose 10 per cent tariffs on Germany, France, the UK, the Netherlands, Finland, Sweden, Norway and Denmark on February 1 that would escalate to 25 per cent on June 1 until a deal on America’s ownership of Greenland is reached has already ignited discussion of European retaliation.
An emergency meeting of EU leaders will be held this week to decide how to respond to Trump’s threats, which have been described in Europe as blackmail, but are more akin to extortion.
Already in question is the trade deal the EU and US agreed last July, under which EU exports to the US would incur a 15 per cent tariff, while US exports to the EU would be tariff-free. That deal was supposed to be ratified by the European Parliament late next week, but that vote is now likely to be suspended.
France, in particular, is pushing the EU to activate its “bazooka,” or the nuclear option of using the EU’s “anti-coercion” instrument it created in 2023 after China froze all trade with Lithuania, which had allowed Taiwan to open a representative office in Vilnius under its own name.
If the instrument were activated – and that’s a big “if,” given how mutually destructive the US response would probably be – it would enable the EU to limit US access to its markets, restrict US investments in Europe, suspend US intellectual property rights, ban US digital services, bar US firms from bidding for government contracts and shut out US banks from the European banking system, among other measures.
The likelihood that it would result in more tariffs, Europe’s reliance on the US for weaponry, the dominance of US institutions in the global financial system, the significance of US tech and social media companies within Europe and the probable end of NATO if the anti-coercion instrument was deployed means its activation would have seismic implications for the future of Europe and geopolitics.
That makes it a measure of last resort. In the meantime, the EU is busily drawing up plans to revive the €93 billion ($A160 billion) of retaliatory tariffs it had identified last year after Trump announced his “Liberation Day” tariffs. Those tariffs were suspended until February 6 this year, pending approval of the trade deal.
Using the retaliatory tariffs would be less provocative than resorting to the anti-coercion instrument, but would demonstrate that the EU isn’t going to simply roll over in response to Trump’s demands.
The EU has also reached out to Congress, hoping that the threat to NATO and America’s historic relationship with the EU might finally galvanise some Republican opposition to Trump’s presidential over-reach.
There does appear to be a nucleus of opposition within Republican ranks to the plan to acquire Greenland, whether by buying it or, as Trump has threatened, by force, although whether that translates to anything substantive from a Congress that, thanks to Republican majorities, has acceded to almost everything the White House has demanded is an open question.
Why Trump is so insistent on owning Greenland when both Denmark and Greenlanders themselves say the US can, thanks to a 1951 treaty, establish as many military bases as it wants and that they are open to US companies trying to exploit the island’s considerable mineral resources, is unclear.
US Treasury Secretary, Scott Bessent, said at the weekend it was because Europe was too weak to guarantee the security of the strategically important territory in the face of Chinese and Russian aggression.
“Europeans project weakness, US projects strength,” he said.
“The president believes enhanced security is not possible without Greenland being part of the US.”
It is uncertain, given that the only information of Trump’s latest tariffs came via a social media post, what authority Trump is relying on to impose tariffs on the eight countries he has identified, although Bessent referred to a “national emergency.”
Asked what that national emergency might be, he replied (bizarrely) that “the national emergency is avoiding the national emergency.”
As the US could assuage its national security concerns without owning Greenland, one suspects that the real reason Trump is so adamant that it should be acquired, or taken by force, is that he is being driven by personal ambition: he wants a legacy of being associated with the large-scale expansion of US territory. Greenland’s land area is larger than that acquired in the Louisiana Purchase in 1803 that nearly doubled the then size of America. It’s about Trump’s ego, not national security.
If the tariffs were to be deployed under the banner of national security, using the International Emergency Economic Powers Act (IEEPA) – as most of Trump’s tariffs have been – their threat might be short-lived, or at least postponed until Trump can come up with another mechanism, given that the US Supreme Court is expected to rule on the constitutionality of the IEEPA tariffs imminently.
It shouldn’t need to be repeated, but if the Supreme Court ticks off on the IEEPA tariffs and the new duties on EU exports to the US are imposed, they would be paid by American importers (contrary to what MAGA believes and some in the White House assert) and add to the cost of goods for American households that are already experiencing affordability challenges.
The cost to its own consumers is why the EU refrained from enacting its own retaliatory tariffs last year.
In threatening to revive them, it knows there would be adverse impacts for its members’ economies, but would hope that their threat might cause Trump to back off, as he has tended to do when others, like China, call his bluffs (the “TACO,” or “Trump Always Chickens Out” trade).
Last year, when confronted by Trump’s decision to impose punitive tariffs on friends and foes alike, the European response was to appease him rather than risk, not just trade with America, but the future of the NATO alliance at a moment when, with Russia invading Ukraine, an under-prepared Europe needed it.
Trump’s assault on Denmark and Greenland’s sovereignty, and the reality that the EU can’t deliver what Trump is demanding, however, makes appeasement and the fawning flattery that the Europeans deployed to stroke Trump’s ego non-viable options.
Unless Congress or the Supreme Court intervene, Europe will have to confront some very difficult questions about its own sovereignty and integrity and its place within a world where it can no longer see the US as its major trading partner and a long-standing and protective ally. Russia and China would be struggling to contain their glee at that prospect.
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Stephen Bartholomeusz is one of Australia’s most respected business journalists. He was most recently co-founder and associate editor of the Business Spectator website and an associate editor and senior columnist at The Australian.Connect via email.
