Trump's Greenland tariff threat and reversal

22nd January 2026

President Donald Trump earlier threatened to impose new tariffs on eight European countries including the UK, Germany, France, Sweden, Norway, the Netherlands and Finland unless they agreed to U.S. demands related to Greenland, a semi-autonomous Danish territory.

He floated tariffs of 10% starting 1 February and up to 25% by June if no deal was reached.

The tariffs were linked explicitly to pressure on these allies over Greenland, not routine trade disputes — a move that triggered strong political backlash in Europe and rattled markets.

European reaction — significant pushback

European leaders reacted fiercely, calling the tariff threat inappropriate and a potential breach of longstanding alliance norms. The European Parliament even halted work on a U.S.-EU trade deal in protest, underscoring how seriously lawmakers viewed the threat.

Why Trump stepped back — "framework of a deal"

On 21 January 2026, Trump announced he would not go ahead with the planned tariffs. He cited reaching a “framework of a future deal” with NATO Secretary-General Mark Rutte on Greenland and broader Arctic security at the World Economic Forum in Davos. Trump framed this agreement as addressing U.S. strategic interests in the Arctic — though details of the so-called framework were vague and Denmark stressed that sovereignty over Greenland is not negotiable.

Did business pressure and markets matter?

There's evidence rising geopolitical risk weighed on investors: European stocks had reacted negatively to the tariff threat, and markets rallied once Trump signalled he was backing away. This suggests some relief among businesses that feared higher tariffs on exports and the disruption of supply chains.

So can European businesses breathe easier?

Somewhat — but with important caveats:

Immediate tariff risk reduced:
For now, the threatened tariffs scheduled for February 2026 have been paused, which lowers short-term cost risks for exporters in Europe. That’s positive for businesses that trade heavily with the U.S.

But uncertainty remains:

The “framework” Trump cited lacks firm, public details; it’s unclear if and how it would translate into concrete trade or security arrangements.

The underlying dispute hasn’t been fully resolved — Trump continues to link Arctic security and Greenland policy with U.S. trade leverage.

European lawmakers have shown they’re willing to use trade tools (including blocking trade agreements) in response to coercive tactics.

So while the immediate tariff threat has been withdrawn, strategic tensions over Greenland and Arctic policy could still create trade uncertainty.

Why Trump changed his mind

Based on public statements and reporting, several factors likely influenced his decision:

Diplomatic pushback and alliance strain: Strong European political unity against the tariff threats and moves like halting a key trade pact likely signalled high diplomatic cost.

Market reaction: Negative reactions in financial markets may have encouraged a de-escalation.

Davos and NATO diplomacy: Trump used his meeting with the NATO Secretary-General as an opportunity to pivot toward a proposed “framework” on Arctic cooperation, suggesting he saw a face-saving way to dial down tensions without abandoning his underlying objectives.

European businesses likely feel some relief in the short term, as an imminent tariff shock has been averted — but broader strategic and political tensions remain unsettled, and transatlantic trade could still be affected if the Greenland dispute or other U.S. leverage tactics resurface.

If you want, I can break down which European industries would have been most affected by the tariffs that were threatened and how much trade at stake there is.