Negotiations and Tariff Threat of Ongoing US-Europe Territory Dispute

Abstract

The ongoing dispute over US President Trump’s ambition to annex Greenland has led to heightened tensions between the United States and its European allies. Despite diplomatic efforts to de-escalate the situation, Trump has threatened increased tariffs on several European countries. European leaders debate the possibility of invoking the anti-coercion instrument to introduce significant trade sanctions against the US should the US go ahead with threats. Recent negotiations at Davos have eased immediate tariff concerns, with talks opening the possibility for a future deal. Although Trump has stated the US will not use military force in Greenland, he maintains the necessity of American control as a security priority.

Strategic Overview

Shift in Trade Policy: Diplomatic attempts to de-escalate US President Trumps ambitions to annex Greenland have so far been unsuccessful. European leader’s support for Denmark has prompted Trump to threaten a transatlantic trade war. 

• On 17 January 2026, Trump declared that European allies Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland would face a punitive 10% levy on import tariffs if an agreement over Greenland was not reached. 
• He further warned that these tariffs would be increased to 25% in June if the deadlock persisted. 

European Response: In the face of mounting pressure, NATO and European allies are reevaluating their strategies. There is increasing momentum behind a hard-line stance to resist Trump’s demand for total US control of the region. While Europe seeks to avoid deepening the transatlantic rift, the recent US threat of increased tariffs suggests the necessity of a stronger, divisive response. 

• European leaders are considering invoking its anti-coercion instrument (ACI), spearheaded by French President Emmanuel Macron, which would introduce sweeping trade sanctions against the United States. 
• These measures would effectively exclude the US from the EU’s internal market, impose strict export controls, and remove intellectual property protections. 

Ongoing Negotiations: On 21 January, NATO leaders and government officials gave political address at the World Economic Form in Davos on the unfolding situation. 

• Trump officially stated that the US would not use military force to seize Greenland but remains consistent that it is essential for the US to take control of the country to prevent crisis. 
• This was followed by a step back on imposing tariffs on select European countries from 1 February after talks with the NATO secretary general developed the “framework of a future deal”. 
• As negotiations progress, there is talk of establishing a US missile defence shield, which would be partly based in Greenland. 

Operational Context

US-Europe Conflict: The current dispute centres on US President Trump’s ambitions to annex the semi-autonomous region of Greenland from NATO member Denmark, with significant concerns around the use of military force. Trump has demanded that the US have ‘complete and total control’ of Greenland, with the aim of making it the 51st US state. European allies have strongly opposed this move, with Danish Prime Minister Mette Frederiksen commenting an attack would mean the end of NATO. 

• European countries have since sent a limited deployment of troops to Greenland, including Denmark, Germany, France, Sweden, Norway, Finland, the Netherlands, and the UK. The multinational force is there to gather intelligence and bolster security on the island. 

Greenland as a Security Priority: Greenland’s position between the US, Russia, and China offers a strategic geographic advantage for the US to institutionalise and remodel transatlantic security. Trump has argued that holding Greenland is matter of national security, and that Denmark is incapable of holding the territory or defending it from an Eastern threat, suggesting both Russia and China are seeking to claim the region. He has proposed the establishment of a US missile defence shield called the Golden Dome to provide greater defence for the Western hemisphere.

Geopolitical Tensions

Denmark: While Trump has said he believed a deal could be worked out with Denmark, Danish Foreign Minister Lars Løkke Rasmussen described a “fundamental disagreement” in US and Danish interests following the meeting in Washington between Denmark and Greenland’s foreign ministers with US Vice President JD Vance. 

Greenland: Trump persists that the US is unequally benefited from the NATO agreement, suggesting Greenland is owed to the US in return for US defence guarantee. Trumps demand to control the country overlooks native Greenlanders wishes on the matter and ignores Greenland’s ambitions of gaining gradual autonomy. 

Norway: Prime Minister Støre invited Trump to de-escalation talks following the tariff announcement. In response, Trump wrote “I no longer feel an obligation to think purely of peace”, in reference to not being given the Nobel Peace Prize, and reiterated that Denmark does not have a “right of ownership”. 

UK: Prime Minister Starmer suggests the unlikeliness of tariff retaliation against the US, stating that US tariffs are not in the interest of the British economy, although it has not been ruled out. The UK is currently preparing to shield British businesses should Washington push ahead with its threats. 

Russia: Common sentiment in Moscow has shown satisfaction in the fracturing of NATO. However, security concerns have arisen, with Russia’s embassy in Belgium accusing the NATO alliance of building up a military presence there “under the false pretext of a growing threat from Moscow and Beijing”. 

China: China’s Vice Premier He Lifeng stated that the recent tariff announcement and unilateral actions of the US “violate the fundamental principles and rules” of the World Trade Organisation. He emphasised the principles of globalisation and trade liberalisation that underpin many countries development. 

Europe: During his recent address in Davos, Trump also heavily critiqued Europe for its climate ambitions and immigration policy. He stated he wanted Europe and the UK “to do great” but attested that “they are losers” for falling for the “new green scam” of decreasing dependence on fossil fuels and that “socially disruptive migration” is destroying Europe through the importation of foreign cultures.

Strategic Outlook

Should an agreement fail to be met, increased US tariffs would pose severe risks to European economic stability, potentially resulting in higher inflation, employment insecurity for select industries, and a slowdown in GDP growth. 

The ACI measures being considered are intended to be proportionate to the economic damage inflicted by the aggressor, while aiming to minimise the overall impact on Europe. 

• Should this move be carried out, the US would be under sanction from the world’s largest free trade bloc, severely impacting US businesses that rely on US-EU trade. 
• Bilateral and multinational trade agreements between the US and European countries would be at risk under the new economic policy, leading to increased price volatility and supply uncertainties for key exports.

Nevertheless, European consumers would be likely to encounter increased costs and restrictions on goods and services from US companies. The effects would not be felt evenly across Europe, with some countries more exposed than others due to their dependence on US trade. 

• Germany in particular would face significant vulnerability should trade restrictions be implemented. The US remains one of Germany’s leading export destinations, and as a country where exports make up around half of its GDP, it is highly sensitive to global economic shifts. Approximately a quarter of German jobs are linked to international trade, and more so in the manufacturing sector. 

Final Word

The geopolitical tensions between the US and Europe over Greenland highlights a significant shift in political strategy. Tariffs are now being wielded as leverage to influence territorial and sovereign decisions. They are increasingly determined by geopolitical and diplomatic outcomes, rather than purely for fiscal revenue, leaving them more akin to sanctions. Alongside uncertainty around the NATO security alliance, economic retaliation is emerging as a weapon to force compliance from longstanding allied states, signalling the potential for a new wave of global shocks. The possibility of a break within the Western world would have uncalculated consequences for alliances and trade. 

Niamh Allen is a GPIU Fellow at the Sixteenth Council