By Auzinea Bacon, CNN
(CNN) — President Donald Trump’s latest tariff threats over Greenland and Europe’s potential countermeasures could result in significantly higher import prices that could weaken both economies.
Neither side appears to be messing around: In an extraordinary escalation of Trump’s pursuit of Greenland, the president announced Saturday that he would impose 10% tariffs on February 1 on goods from Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom. It would increase to 25% if an agreement is not reached by June 1.
That triggered an emergency meeting of European countries’ representatives Sunday, and French President Emmanuel Macron reportedly asked the European Union to activate its so-called anti-coercion instrument, colloquially known as a “trade bazooka.” The trade bazooka could block some of America’s access to EU markets or impose export controls, among a broader list of potential countermeasures.
That trade defense was made with countries like China in mind, not allies like the US, noted Erica York, vice president of federal tax policy at the Tax Foundation.
The bloc will also consider imposing €93 billion of previously announced retaliatory tariffs against the United States that were delayed when the EU and US reached a tentative trade truce in July last year, according to Reuters.
“At least judging from the first reactions, some European leaders are willing to play hardball, said Carsten Brzeski, global head of macro at ING, in a note to clients Sunday. “For businesses, the developments over the weekend mean another period of uncertainty around investments in and exports to the US.”
That business uncertainty led many US companies to pause hiring in 2025 as they sought clarity during Trump’s unprecedented string of on-again, off-again tariff actions.
Brzeski said he expects the increased tariffs to shave off a quarter percentage point off European gross domestic product this year.
“Europe is still dependent on the US in many ways, both from an economic and security point of view,” he noted.
Dealing an economic blow to both economies
Using its “trade bazooka,” which could suspend US company licenses or tax US services, could take the EU months to implement, warned Dan Hamilton, a senior non-resident fellow at the Brookings Institution.
“Trump’s latest threats risk shredding the trade arrangements the US concluded with both the UK and the EU last summer, and further straining relations with America’s closest allies,” Hamilton said.
The EU implemented its trade agreement with the Trump administration last summer, but it hasn’t yet signed the accord. Although some leaders, including Germany’s Chancellor Friedrich Merz, supported the deal because it avoided a significant tariff escalation on both sides, many European leaders decried the agreement when it was announced, and Trump’s latest salvo puts the deal in doubt.
The European Parliament’s Manfred Weber said on X, that “given Donald Trump’s threats regarding Greenland, approval is not possible at this stage” for a US-EU trade agreement.
“These actions really do represent an end of the credibility of American commitments. That’s going to have adverse effects on the world economy,” said Steven Durlauf, a professor at the University of Chicago’s Harris School of Public Policy.
In 2024, the United States traded $236 billion worth of goods with Germany, according to the US Census Bureau, in addition to $147.7 billion with the United Kingdom, $122.27 billion with the Netherlands, $103 billion with France