Jun Du, Professor of Economics, Centre Director of Centre for Business Prosperity (CBP), Aston University, Oleksandr Shepotylo, Senior Lecturer in Economics, Aston University
European negotiators believed they had bought stability in July 2025 amid the global trade turmoil sparked by Donald Trump’s liberation day tariffs. The EU’s deal with the US involved eliminating tariffs on American goods, purchasing US energy and committing to American investment. But six months later, as the US president made his intentions regarding Greenland clear, it collapsed.
Trump has now threatened new tariffs on eight European countries, the UK among them. The tariffs punish countries that sent military personnel to Greenland in support of Danish sovereignty.
The president has said 10% tariffs will apply to all goods entering the US from the eight countries from February 1, rising to 25% on June 1 until he is able to buy the territory.
This isn’t an aberration. The US offered to buy Greenland in 1946. And before that it purchased Alaska (in 1867, from Russia), Florida (in 1821, from Spain) and Louisiana (in 1803, from France). What’s different now is the coercion mechanism – tariffs rather than a negotiated price.
Greenland offers Arctic shipping routes, rare earth deposits and missile defence positioning. Trump’s “Golden Dome” defence system needs more than military bases – it requires sovereign control to deploy classified systems without Danish oversight.
This is the same logic that drove pressure on Panama to renegotiate US control of the canal. This showed how existing arrangements aren’t enough – Washington wants exclusive control.
The tariff threats serve multiple purposes: punishing countries that showed solidarity with Denmark, testing whether economic pressure can fracture Nato from within, and of course generating revenue.
US tariff income hit US$264 billion (£197 billion) in 2025, up US$185 billion from 2024 after new tariffs kicked in. This is a windfall that makes security-dependent allies who cannot retaliate reliable payers.
The usual playbook won’t work
When China faced US tariffs in 2025, it retaliated hard. China targeted soybeans from swing states, restricted rare earths with new export licences and slowed regulatory approvals for US tech companies. Beijing could absorb pain and inflict it back. That was a trade war fought with trade weapons.
Europe’s position is different. Brussels is now discussing the anti-coercion instrument – the so-called “trade bazooka”.
This law gives the EU teeth to hit back against economic blackmail from a non-EU country and overrides existing trade deals. In practice, this could restrict US companies from public procurement and impose retaliatory tariffs on €93 billion (£81 billion) of American goods.
Read more: Tariffs may bring a US$50 billion monthly boost to the US government. But ordinary Americans won't feel the benefit
But the EU requires unanimity for serious trade retaliation, and member states differ vastly in their US market exposure and Nato security dependence. Any serious escalation risks the security guarantee, a constraint China never faced.
And these tariffs aren’t really about trade anyway. Fighting a territorial objective with trade weapons is bringing the wrong tools to the job.
If trade diplomacy cannot solve a territorial problem, what can? The conventional playbook offers escalating retaliation — measured responses or catastrophic threats meant to deter a rational actor. But that assumes your opponent isn’t playing a game where brinkmanship is the point. Given those constraints, we have identified five options. None of them is comfortable.
1. Accept the new reality
Treat US tariffs as a permanent feature of transatlantic trade rather than a disruption to negotiate away. Price them into business planning and stop expending political capital on deals that probably won’t hold.
2. Diversify faster
The EU-Mercosur agreement signed in the same week between Brussels and the South American trading bloc wasn’t a coincidence. It was agreed in the knowledge that higher US tariffs were a distinct possibility one day.
For the UK, diversifying means accelerating its own negotiations (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – CPTPP, the Gulf and India). Every percentage point shifted from the US reduces Washington’s leverage.
3. Address the security dependence
European defence spending has risen sharply since Russia’s full-scale invasion of Ukraine — from €251 billion in 2021 to €343 billion in 2024. But capability takes longer than building up budgets. The Greenland tariffs illustrate the cost of dependence. When your security guarantor becomes your economic coercer, your options narrow dramatically.
4. Reconsider the UK-EU relationship
The crisis creates opportunity for both sides. These options require coordination across member states with vastly different US exposure and Nato dependence. Bringing Britain closer strengthens Europe’s negotiating position while giving the UK strategic options beyond an increasingly transactional US relationship.
The slow reset has been constrained by reluctance to make Brexit look costless. But when both face a direct challenge to the post-war order from their principal security guarantor, the calculation changes. Closer alignment becomes mutual strategic necessity.
5. Hold the line together
The worst outcome would be European countries peeling away from Denmark to escape tariffs. That is precisely what the policy is designed to achieve. This is the logic of political deterrence, which would suggest that showing solidarity will prevent further demands. If this cracks, there is likely to be more of the same from the US.
Whether Trump will ultimately acquire Greenland remains uncertain. Conventional wisdom says he won’t, but conventional wisdom has been wrong before. What’s clear is that this isn’t a tariff dispute requiring trade concessions. It’s a structural shift in transatlantic relations, and European strategy needs to adjust accordingly.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
