Tariffs blow up again: New uncertainty over Greenland

In summary

• Trump’s shock tariffs over Greenland have thrown international trade into doubt 
• UK and EU deals signed last year now look likely to stall 
• Things could also escalate further, with some in the EU calling for it to use its trade “bazooka” 

If the first few weeks of the year are anything to go by, political risks may be among the key trends that define 2026 for businesses. On Saturday, President Trump announced he would impose a 10% tariff on the UK, as well as Denmark, Norway, Sweden, France, Germany, the Netherlands and Finland from 1 February after they “journeyed to Greenland, for purposes unknown”, as he put it in his post on Truth Social.  

If no deal is reached for the “complete and total purchase” of Greenland by 1 June, the tariff will rise to 25%.

These tariffs are presumably (although the President’s statement did not clarify) in addition to those imposed following last April’s “Liberation Day” and the subsequent negotiations: 10% for most UK goods and 15% for the EU. Given the difficulties involved in applying tariffs to individual markets within the single market, it also seems likely the additional rate would be applied across all EU member states if it comes into force. 

The President’s stated rationale for the move is that Greenland is essential for US and global security, and that the Danes are unable to defend the territory against threats from China or Russia. However, under the 1951 Greenland Defence Agreement, which was renewed in 2004, the US already has Denmark’s permission to operate military bases and house troops on the territory.  

At the height of the Cold War, the US had 15,000 personnel on Greenland. That’s shrunk to just 200 today. Not unreasonably, many suspect the main motivation for Trump’s belligerence is really an appetite for Greenland’s natural resources. It has significant reserves of rare-earth minerals as well as suspected oil and gas reserves.  

Regardless of the reasons, what matters for businesses trading with the US is the impact this will have on exports and imports.  

While the UK Prime Minister has condemned the US moves as “completely wrong”, he has not joined European leaders who are said to be drawing up plans for retaliatory tariffs on US goods. Instead, Starmer committed to ongoing negotiations with the US.  

“A tariff war isn’t in anybody’s interests,” he told reporters.  

It’s unclear yet what dividends a more conciliatory approach may bring, or the consequences for the US-UK Economic Prosperity Deal (EPD) agreed last May, which set the general terms of a new trade deal. As we noted at the time, this was light on detail, but progress in clarifying the countries’ trading relationship was being made. In December, for example, the US and UK announced an agreement in principle on pharmaceutical pricing. This also committed to exempt UK pharmaceuticals, pharmaceutical ingredients and medical technology from Section 232 tariffs.  

That progress is now in doubt.  

So, too, is the US-EU trade deal, announced in July 2025, which established a 15% tariff on most EU goods exported to the US while the EU committed to eliminating all tariffs on US industrial goods. Early indications are that the EU is now putting that deal, due to be voted through the EU Parliament on 26 January, on hold.  

EU lawmakers are expected to confirm the freezing of the deal during a meeting on Wednesday, 21 January. As one MEP told reporters from Politico, “We cannot rule out either retaliatory tariffs or the use of the ‘bazooka’ if the pressure and coercion continue”: A reference to the EU anti-coercion instrument. This would allow the EU to take measures such as import and export restrictions on goods and services and limiting American companies’ access to public procurement contracts in Europe. 

After a fraught year in US trade relations, many will have hoped 2026 would at least establish a new normal. Now we can only hope things don’t blow up.