President Donald Trump’s newest tariff threats over Greenland and Europe’s potential countermeasures could lead to considerably increased import costs that could weaken each economies.
Neither aspect seems to be messing round: In a rare escalation of Trump’s pursuit of Greenland, the president introduced Saturday that he would impose 10% tariffs on February 1 on items from Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom. It would improve to 25% if an settlement isn’t reached by June 1.
That triggered an emergency assembly of European international locations’ representatives Sunday, and French President Emmanuel Macron reportedly requested the European Union to activate its so-called anti-coercion instrument, colloquially often called a “trade bazooka.” The commerce bazooka could block a few of America’s entry to EU markets or impose export controls, amongst a broader record of potential countermeasures.
That commerce protection was made with international locations like China in thoughts, not allies just like the US, famous Erica York, vice chairman of federal tax coverage on the Tax Foundation.
The bloc can even take into account imposing €93 billion of beforehand introduced retaliatory tariffs towards the United States that have been delayed when the EU and US reached a tentative commerce truce in July final 12 months, in keeping with Reuters.
“At least judging from the first reactions, some European leaders are willing to play hardball, said Carsten Brzeski, global head of macro at ING, in a note to clients Sunday. “For businesses, the developments over the weekend mean another period of uncertainty around investments in and exports to the US.”
That enterprise uncertainty led many US corporations to pause hiring in 2025 as they sought readability throughout Trump’s unprecedented string of on-again, off-again tariff actions.
Brzeski mentioned he expects the elevated tariffs to shave off a quarter share level off European gross home product this 12 months.
“Europe is still dependent on the US in many ways, both from an economic and security point of view,” he famous.
Using its “trade bazooka,” which could droop US firm licenses or tax US companies, could take the EU months to implement, warned Dan Hamilton, a senior non-resident fellow on the Brookings Institution.
“Trump’s latest threats risk shredding the trade arrangements the US concluded with both the UK and the EU last summer, and further straining relations with America’s closest allies,” Hamilton mentioned.
The EU carried out its commerce settlement with the Trump administration final summer time, however it hasn’t but signed the accord. Although some leaders, together with Germany’s Chancellor Friedrich Merz, supported the deal as a result of it prevented a important tariff escalation on either side, many European leaders decried the settlement when it was introduced, and Trump’s newest salvo places the deal doubtful.
The European Parliament’s Manfred Weber mentioned on X, that “given Donald Trump’s threats regarding Greenland, approval is not possible at this stage” for a US-EU commerce settlement.
“These actions really do represent an end of the credibility of American commitments. That’s going to have adverse effects on the world economy,” mentioned Steven Durlauf, a professor on the University of Chicago’s Harris School of Public Policy.
In 2024, the United States traded $236 billion value of products with Germany, in keeping with the US Census Bureau, along with $147.7 billion with the United Kingdom, $122.27 billion with the Netherlands, $103 billion with France, and tens of billions of {dollars} every with Sweden, Norway and Finland.
Trump might have allowed for a loophole, nonetheless: Trump’s tariffs are directed at a choose few member nations, not the whole European Union. So the eight international locations could reroute commerce throughout the EU’s free commerce bloc to keep away from these tariffs.
“There’s no border between Spain, Italy, Germany and France. Anybody can ship a good through another country quite easily if we try and tariff individual states,” warned Joseph Foudy, a New York University Stern School of Business professor.
An fast 10% tariff received’t rattle the economic system as considerably because the long-term results of a strained relationship with America’s largest buying and selling companions.
It’s the uncertainty about whether or not Trump will escalate his tariff threats or again out earlier than imposing new duties that could make buying and selling companions avoid America long-term.
“Uncertainty is the enemy of growth,” mentioned Durlauf of the University of Chicago. He added that Trump’s unprecedented choices “make things somewhat irreversible,” as allies lose religion even after a new administration takes workplace.
These tariffs could even be struck down by the extremely anticipated Supreme Court ruling on Trump’s use of emergency powers.
America’s largest buying and selling companions are actively strengthening commerce relations with different nations. Canada celebrated a “strategic partnership” with China final week, together with easing tariffs and promoting Chinese EVs. And the EU introduced it struck a deal with South America’s Mercosur, capping off 25 years of commerce negotiations.
“In actions to try and acquire Greenland, we might paradoxically be driving our most important allies away. The cost of this policy is that it’s actually emboldening the very enemies that we’re concerned about,” mentioned Foudy.
He added that the coverage would weaken America’s export competitiveness, and firms might resolve to delay funding choices due to tariff uncertainty
“The real cost of the tariff conflicts — because tariff rates seem to sometimes change by day — is the factories that were never built just because companies aren’t certain enough,” he mentioned.