DAVOS and WASHINGTON—In Davos, where Josh recently landed, preparations are underway to welcome US President Donald Trump, French President Emmanuel Macron, German Chancellor Friedrich Merz, European Commission President Ursula von der Leyen, and dozens of other global leaders under this year’s theme: “A Spirit of Dialogue.”
But the truth is there is very little spirit—and even less dialogue—between Trump and his European counterparts right now.
Relations between Washington and Brussels were upended this weekend after Trump said on social media Saturday morning that he would impose a 10 percent tariff on France, the Netherlands, Denmark, Norway, Sweden, France, and the United Kingdom—presumably on top of the existing tariffs— “until such time as a Deal is reached for the Complete and Total purchase of Greenland.” In the same post, which targeted countries that recently sent troops to Greenland, Trump threatened to raise these tariffs to 25 percent if such a deal has not been agreed to by June 1. For all the Wall Street analysts who argued that the second year of Trump’s term would bring more stability on the tariff front, Saturday morning should have been a wake-up call. Trump is not abandoning his favorite economic weapon anytime soon—unless, that is, the Supreme Court forces him to, as the court is set to rule on the legality of many of the administration’s tariffs as soon as this week.
This all adds up to an incredibly volatile situation: a US president seemingly willing to seize the territory of a NATO ally or force its sale, a Supreme Court that may dramatically alter the tools the president has to levy tariffs, and a European Union (EU) asking itself whether it made a mistake by agreeing to a lopsided trade deal just six months ago in Scotland—and increasingly questioning the future of the US-European alliance.
Below, we break down each of these dimensions—and how they could escalate or deescalate in the week ahead.
Europe’s scramble for a united response
If Wall Street underestimated the president’s use of tariffs, so did Europe. Fresh off the successful signing of the EU-Mercosur trade deal on Saturday in Paraguay, the new threats brought von der Leyen and European Council President António Costa back to the harsh realities of Trump-era power politics.
Their initial reaction in true Brussels style: coordinate a European response among the twenty-seven EU countries.
Macron went further, declaring the tariffs “unacceptable” and calling for the EU to deploy its so-called “big bazooka” against economic blackmail: the much-touted but never-used Anti-Coercion Instrument (ACI). This stood in contrast with the response from Italian Prime Minister Giorgia Meloni, a Trump ally. She said that the US tariffs would be a mistake but characterized the dispute over Greenland as a misunderstanding and called for dialogue and de-escalation.
To equip European leaders with greater leverage, the Commission is dusting off a €93 billion package of retaliatory tariffs that it prepared during the trade negotiations following Trump’s “Liberation Day” global tariff announcement but suspended after the bloc brokered the Turnberry trade deal with Washington last July. The threat of these tariffs, however, will hardly strike fear into the US president. This White House knows full well that it has the upper hand in pressuring a low-growth EU with a a $236 billion trade surplus with the United States and divergent member state interests.
The ACI also is likely disappearing into back pockets in Brussels, despite bluster from Paris and the European Parliament. Designed to counter economic coercion from China and give the EU more flexibility and leverage in trade talks, its potential use has generated strong reservations from member states that are more dependent on the United States for security and trade. Much depends too on what position Germany will take and whether Berlin and Paris can align on the use of the instrument.
Another missed opportunity for Europe is the absence of a done deal on US-EU trade. While Washington and Brussels agreed the Turnberry deal last July, the EU has yet to fully ratify the framework agreement. Opposition to the deal in the European Parliament has been building for months. But it reached a boiling point on Saturday when the largest political group in the European Parliament, von der Leyen’s center-right European People’s Party, announced that it will not vote to approve the deal in the face of Trump’s threats.
Without the Turnberry deal implemented, the EU will have a harder time countering Trump’s punitive Greenland tariffs and preventing him from reopening a trade dispute that many hoped had been closed.
Many leaders in Europe would still prefer to avoid an open confrontation or rupture with the Trump administration. But the US president’s more brazen approach on Greenland is testing the limits of Europe’s hugging-the-bear strategy–efforts to continue engagement with the US president amid volatility and manifest disagreements while avoiding open confrontation. Trump’s aggressive push risks robbing European leaders of what political space is left at home to maintain their carefully calibrated balancing act vis-à-vis the United States. Geopolitical sparring over Greenland alone will not push Europe into collective opposition to the United States. But with the Trump administration refusing to rule out military options and levying economic threats over the president’s personal ambitions for the Arctic island, that dynamic might just change.
The Supreme Court, tariffs, and Trump’s next move
All of the above assumes that the US Supreme Court does not tell the president—possibly as soon as Tuesday—that he can no longer use the International Emergency Economic Powers Act to impose tariffs. The threat issued against Europe would almost certainly rely on that authority if Trump were to follow through with it.
If the court ends up siding with the president, expect Trump to double down. The last meaningful check on his tariff authority would be gone, and there is little chance Congress would muster the support needed to rein him in.
The more likely scenario, however, is that the court either rejects or sharply limits his powers. In that case, Trump will need a Plan B.
That plan has been contemplated before—with Europe in mind. While Trump has been surprisingly disciplined in dealing with the European Commission rather than individual member states, he has previously threatened specific countries, including Spain, with sector-specific tariffs. If the court rules against him, expect to see a wave of French, Dutch, and Danish agricultural and industrial products being targeted under Section 232 and Section 301 authorities. Regardless of the court’s ruling, those authorities will remain firmly in the president’s power.
Trump also would likely turn to Section 122 authority, which allows tariffs of up to 15 percent for 150 days. But that would merely replace existing EU tariff levels—not add to them—which appears insufficient for the kind of leverage he wants to exert.
The deeper problem: no deal space
The larger issue—to use the favorite buzzword in Davos—is the lack of deal space between Trump and Europe.
On trade, the path to a deal for the two sides has been much clearer. As both the United Kingdom and the EU have shown, an agreement can be reached with Trump if the other side is willing to cut tariffs on US goods and pledge hundreds of billions of dollars in investment in the United States. It’s a model that has been followed around the world.
But Greenland is different. It is unclear what compromises Europe could offer—military, security, economic, or otherwise—that would satisfy Trump. It is even less clear whether he will be satisfied by anything short of Greenland coming into US possession. This is the most troubling dimension of the threat. Among the people Josh has spoken with on the ground in Davos so far, few see an obvious off-ramp. And that is what makes escalation more likely than at any other time since Trump’s return to the White House.
