European leaders are bracing for an all-out trade war with the U.S. once again after President Trump threatened to impose a 10% tariff on imports from countries that oppose his demand to take control of Greenland, Time magazine reports.
European Commission President Ursula von der Leyen warned during her speech at the World Economic Forum that the EU’s response to the tariff threats will be “unflinching, united and proportional.”
“In politics as in business, a deal is a deal. And when friends shake hands, it must mean something,” von der Leyen said.
Trump, however, remains adamant about taking over the Arctic island.
Here are five ways, according to author Phillip Wang, the European allies could respond to Trump’s threat to acquire the island:
Retaliatory tariff
The EU could respond by matching the U.S. tariffs with similar measures on American products.
Last year, Brussels proposed tariffs on 4,800 U.S. exports, worth $108 billion. The list goes into effect Feb. 7 unless the European Parliament halts it.
Since Trump revived his interest in Greenland, the proposal to let the EU Parliament pass the tariffs has gained momentum. France’s Foreign Minister Jean-Noel Barrot said France supports the European Parliament’s push to suspend the trade deal between the U.S. and the EU.
Trade “bazooka”
Another measure that the EU could take is activating the Anti-Coercion Instrument, also known as the “trade bazooka.”
The “trade bazooka” goes beyond tariffs. It can add quotas, restrict investments, or suspend IP rights, aiming to deter economic coercion.
This is, however, the EU’s last resort for countermeasures for multiple reasons. For one thing, it would take up to 10 months for the European Commission to investigate and determine whether there is any coercion and retaliation from the concerned country. It would also need a supermajority of 27 Parliament members to back the measure after the investigation, which could take a maximum of 10 weeks to deliberate. The bazooka has also never been used before, and some European countries, like Germany, are still looking for ways to de-escalate.
“We simply want to try to resolve this problem together, and the American government knows that we could also retaliate,” German Chancellor Friedrich Merz said on Monday.
Dumping U.S. assets
European countries hold trillions in U.S. assets. Selling them could raise U.S. borrowing costs, but large-scale sales risk harming Europe’s own economies.
An abrupt sale of the U.S. assets would sink the value of the dollar and drive up the euro, which could quickly upend European countries’ own economies.
The Supreme Court
European leaders await the U.S. Supreme Court’s decision on Trump’s proposed tariffs.
The White House argued that a national security law dating back to the 1970s—the International Emergency Economic Powers Act (IEEPA)—gives the President the authority to declare an emergency and slap down tariffs on his own.
But regardless of the Supreme Court’s ruling, the Trump administration is determined to keep the tariffs.
Defending Greenland by force
A military response is unlikely, but Denmark is increasing its Arctic military presence in reaction.
Denmark’s defense minister said military activity around Greenland will increase due to the tense security situation. Other NATO allies are sending personnel.
Asked on Monday whether he would use force to seize Greenland, Trump told NBC News, “No comment.”
