The United States’ economic relationship with Europe is facing renewed strain after President Donald Trump announced sweeping tariff threats linked to negotiations over Greenland, turning an unlikely territorial dispute into a high-stakes trade confrontation.

On January 18, Trump declared that eight European allies — Denmark, France, Germany, Sweden, the Netherlands, Finland, Norway, and the United Kingdom — would face a 10 per cent tariff from February 1, escalating to 25 per cent by June unless talks over Greenland progressed. The announcement marked a sharp escalation, signalling that geopolitical leverage is now being applied directly to one of the world’s most deeply integrated trading relationships.

A review of long-term US trade data highlights why such measures could backfire. According to US Census Bureau figures, the European Union remains America’s single largest trade partner. Between January and October 2025, EU countries accounted for nearly one-fifth of all US imports, valued at approximately $538 billion — surpassing both Mexico and Canada. During the same period, the EU also absorbed about 19 per cent of US exports, worth roughly $347 billion.

This relationship is not a recent phenomenon but the product of decades of economic integration. Over the past 25 years, the EU’s share of US imports has consistently ranged between 18 and 20 per cent, while its share of American exports has fluctuated between 17 and 22 per cent. From 2000 to 2013, the US exported more to the EU than it imported. Only in the past decade has that balance tilted slightly toward higher European exports to the US.

These stable patterns reflect complex, cross-border supply chains spanning aerospace, automobiles, pharmaceuticals, chemicals, energy equipment, and advanced manufacturing. Analysts warn that tariffs imposed for political reasons risk disrupting systems that cannot be quickly restructured without economic pain on both sides of the Atlantic.

European leaders have already signalled resistance. Brussels has paused ratification of the July 2025 EU-US trade framework, citing incompatibility with unilateral tariff threats. The European Commission is also weighing the use of its Anti-Coercion Instrument, a powerful mechanism that could restrict US firms’ access to public tenders or impose retaliatory duties worth tens of billions of dollars.

Public statements from European leaders underscore the growing diplomatic divide. European Commission President Ursula von der Leyen reaffirmed support for Denmark’s sovereignty over Greenland, while UK Prime Minister Keir Starmer stressed that Britain’s position aligns firmly with Danish and Greenlandic self-determination.

The economic consequences could be far-reaching. Higher tariffs would raise costs for US industries dependent on European inputs, while Europe’s export-oriented sectors — particularly automobiles, machinery, aerospace, and pharmaceuticals — would face mounting pressure. Beyond bilateral trade, global markets could be rattled by uncertainty affecting a partnership that underpins transatlantic economic stability.

While Greenland may be cited as the immediate trigger, analysts caution that the broader fallout could extend across jobs, investments, and strategic cooperation. With geopolitics now driving trade policy, the risk of a prolonged US-EU trade confrontation appears increasingly real.