Trump’s Europe–Greenland Tariffs Jolt Markets

New U.S. Tariff Threats Over Greenland

Global markets are bracing for renewed trade tensions after President Donald Trump vowed to impose additional U.S. import tariffs on eight European nations unless Washington is allowed to buy Greenland. The president said levies of 10% on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain would take effect on Feb. 1, rising to 25% on June 1 if no agreement is reached. The announcement marks a sharp escalation in a dispute that links trade policy with U.S. strategic interests in the Arctic territory.

The affected countries responded with a joint statement backing Greenland, signaling that they do not intend to concede on sovereignty questions. Ireland’s prime minister added that the European Union will retaliate if the U.S. follows through on the tariff plan. The measures would apply to a broad range of goods from major EU economies as well as the U.K., which recently completed its own trade deal with the U.S.

The new duties have been dubbed part of a "U.S.-EU trade war" by Tina Fordham, founder of Fordham Global Foresight, who said the dispute puts Washington back at the center of a geopolitical rupture with key allies. The move comes only months after investors had grown more confident that tariff risks had eased following deals with Britain, the EU and other partners in late 2025.

Market Reaction and Currency Implications

Analysts expect the tariff threat to inject fresh volatility into global markets, though many also note that investor sentiment has proved resilient through earlier rounds of trade frictions. Holger Schmieding, chief economist at Berenberg, said hopes that the tariff situation had calmed for this year "have been dashed" and compared the current backdrop to conditions seen in spring 2025, when the administration’s "Liberation Day" tariffs roiled markets.

Schmieding expects the euro to come under pressure as Asian trading begins, adding that the implications for the U.S. dollar are less clear. While the dollar often benefits as a safe-haven asset, he noted that it can also weaken when the U.S. is at the center of geopolitical strains, as it was during last year’s tariff flare-ups. The euro ended last week at about $1.16, near its lowest level since late November.

Denmark’s closely managed crown is also likely to come into focus given its peg to the euro. The currency has already weakened, but remains close to its central parity and near six-year lows. Rate differentials remain a key factor for the crown, and analysts will watch whether trade tensions trigger further moves by the Danish central bank to defend the peg.

Equities, Defense Stocks and Trade War Memories

Equity markets in Europe have been trading near record highs, with Germany’s DAX and London’s FTSE index both up more than 3% so far this month and outperforming the S&P 500, which has gained 1.3%. Schmieding said the tariff dispute will be "a small setback" for European stocks but is unlikely to trigger a sell-off on the scale of the April 2025 reaction, when the sweeping "Liberation Day" tariffs sent shockwaves through global markets.

One sector that may benefit from the renewed tensions is defense. European defense shares have risen almost 15% this month, helped by concerns around geopolitical flashpoints, including the U.S. seizure of Venezuela’s Nicolas Maduro and worries over Greenland’s strategic position. Fordham said the latest tariff threats reinforce the sense that the trade confrontation between the U.S. and Europe is back, potentially supporting continued outperformance by defense-linked names.

Investors largely treated late-2025 tariff threats as noise and reacted positively when negotiated deals were reached. Market participants will now be weighing whether the Greenland-linked dispute follows a similar path, with tough rhetoric followed by compromise, or develops into a more entrenched conflict that affects trade volumes and corporate earnings on both sides of the Atlantic.

European Political Response Hardens

European leaders have moved quickly to frame the dispute as a collective issue rather than a bilateral spat between Washington and Copenhagen. A joint statement from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the U.K. expressed firm support for Greenland, rejecting the premise that its status is subject to negotiation through tariff pressure. Separately, EU officials signaled they are prepared to respond with countermeasures if the U.S. tariffs are implemented as threatened.

The alignment of key EU economies, Nordic states and Britain suggests that any U.S. move could trigger a coordinated response, ratcheting up trade barriers across multiple sectors. While details of potential European retaliation have not been disclosed, officials have a range of tools at their disposal, including targeted tariffs on U.S. exports and challenges at the World Trade Organization. For now, markets are watching whether the threat of dual-sided tariffs proves sufficient to bring both sides back to the negotiating table before the Feb. 1 deadline.