Trade War ... over Greenland?
- Kevin W. Frisz
- Jan 20
- 2 min read
January 20, 2026
Over the weekend, President Trump said eight NATO countries would face new tariffs until a deal is reached to buy Greenland. In response, French President Macron suggested using the EU’s harshest trade law as counterattack.
So, that’s great.
These eight targeted NATO countries were the nations who contributed to a military force that was sent to Greenland as part of a recent exercise.
President Trump is threatening 10% tariffs by Feb. 1st and 25% tariffs by June 1st. The specifics are unclear. But presumably these tariffs would be in addition to tariff rates set in the agreement outlined last summer.
Speaking of which, where are we with the whole “trade war”-thing anyways? Well, after the President’s “liberation day” in spring last year, the US and EU signed a draft agreement in July. In that deal, both sides had reached broad agreements on the big picture items - a cap on tariffs on actual goods, a digital services tax, etc. However, actual trade deals can be hundreds or thousands of pages long. So the current deal was still a work-in-progress. Now however, it appears to be stalled (and possibly thrown out.)
After last year’s dramatic roller coaster of tariff threats and backing off (and repeating ad nauseum), it’s hard to have any confidence in predicting how this will end.
But both sides are playing with live ammunition. The EU is one of the big four trading partners with the US. Increased taxes on EU imports would lead to more US inflation. Counterattacks by the EU would lead to reduced exports from US companies. It’s not rocket science — higher inflation and lower exports is a bad economic outcome.
Supreme Court Status
As an interesting side note, the Supreme Court is schedule to rule literally any day now on the legality of President Trump using tariffs to fight “economic emergencies”. Treasury Secretary Bessent suggested that the use of tariffs was to "prevent" an emergency.
But even if SCOTUS rules against him, it’s unclear if it will have any effect on the rhetoric. Additionally, the Supreme Court ruling only focuses on the President's authority to implement tariffs under the International Emergency Economic Powers Act of 1973. The President has other laws to choose from if he chooses to implement tariff and trade restrictions of his choosing.
US Dollar as Reserve Currency
On top of these more immediate impacts, there is also the issue of the status of the US dollar as the world’s reserve currency. The US benefits greatly from the fact that its debt trades up/down on macro data news, rather than fiscal policy news. Degrading ties with its closest allies is damaging the US’s reserve status in a way that’s hard to measure over the long-term.
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