The Trump administration plans to use a two-stage tariff to force Europe to cede Greenland, sparking legal doubts within NATO and risking an €8 trillion financial counterattack from Europe.
(Background: Trump announced that in February, a 10% tariff would be imposed on Denmark and eight other European countries, vowing to “take Greenland” and prompting the EU to unite in opposition)
(Additional background: Why is Trump so determined to take Greenland? What secrets does this 80% ice-covered island really hold?)

Table of Contents

• NATO’s Legal Dilemma
• Europe’s Financial Countermeasures
• Market Follow-up Observations

U.S. President Trump made a shocking announcement on the 18th: starting February 1st, the U.S. will impose a 10% import tariff on eight NATO member countries including Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. If these countries do not cooperate on the Greenland issue, the tariffs will further increase to 25% on June 1st.

As U.S.-Europe relations hit a freezing point, Norwegian Prime Minister Stoltenberg publicly shared a conversation he had with Finnish President and Trump on the 19th. In the message, Trump hinted that he no longer feels bound by “peace” because he did not receive the Nobel Peace Prize:

“Given your decision not to award me the Nobel Peace Prize for preventing over 8 wars, I no longer feel obligated to only consider peace. While peace will still be a primary consideration, I can now also think about what is good and appropriate for the United States.”

In the letter, Trump also questioned Denmark’s sovereignty over Greenland again:

Denmark cannot protect that land from Russian or Chinese invasion, and what right do they have to “own” it? There are no written documents—only a ship landing there hundreds of years ago, but we also have ships landing there.
Since NATO was established, I have contributed more than anyone else, and now NATO should also do something for the United States. Unless we have full control over Greenland, the world will not be safe.

NATO’s Legal Dilemma

NATO’s Article 5 states: an attack on any member is considered an attack on all. Republican Congressman Michael McCaul pointed out that if U.S. forces forcibly land in Greenland, it would technically trigger Article 5, forcing the UK, France, and Germany to “defend” Denmark legally against an attack by the U.S.

Currently, NATO is engaged in urgent diplomatic coordination, but Trump’s actions have already revealed visible cracks in member trust.

Europe’s Financial Countermeasures

In response to Trump’s tariff war, the EU may activate counter-coercion tools (ACI) or restrict U.S. tech companies from participating in public procurement.

More threatening are capital measures. According to Fortune, European investors hold approximately $8 trillion in U.S. assets, including a large amount of government bonds. An internal Deutsche Bank report warns that if the EU hints at selling, U.S. bond yields could spike sharply, weakening U.S. government financing capacity and putting the dollar’s credit at risk.

Market Follow-up Observations

This week, several public sessions at the Davos Economic Forum were suddenly turned into closed-door meetings. Leaders from Denmark, Germany, and Norway are seeking to negotiate with Trump before the deadline. If negotiations fail, tariffs, legal actions, and capital measures could all be launched simultaneously, evolving into a game of “nobody can afford to lose.”

In the short term, the focus is on whether Washington will adjust its tariff threats and whether the EU will publicly mention reducing its holdings of U.S. debt. Any concessions from either side could help ease tensions; but if conflicts escalate, NATO’s alliance structure and the global bond markets will face unprecedented pressure.

Global investors are closely watching bond yields and exchange rates to assess the potential chain reactions from this Arctic conflict.