Trade War Reignited: Trump Threatens NATO Allies with Tariffs Over Greenland Dispute

Global markets are bracing for a renewed transatlantic trade conflict after President Donald Trump issued an ultimatum to eight NATO allies: accept a deal for the US acquisition of Greenland or face punitive tariffs. The threat, which specifically targets Denmark, Germany, France, the UK, and other northern European nations, has sent shockwaves through currency markets and accelerated safe-haven flows into Gold (XAU/USD).

• Initial Trigger: February 1 set for new 10% tariff.
• Escalation Risk: Rates may jump to 25% by June 1.
• Economic Stakes: EU retaliation targeting $108 billion in US exports.
• Market Movers: Silver surged 12% on uncertainty.

The Tariff Ultimatum

Starting February 1, imports from the targeted nations will face a 10% tariff, with a threat to escalate the rate to 25% by June 1 if a “comprehensive agreement” regarding Greenland is not reached. The move marks a dramatic escalation in US foreign policy, explicitly linking territorial ambitions with economic coercion.

The impact on the Forex market was immediate. The EUR/USD faced renewed selling pressure as traders priced in the economic damage of a trade war on the already fragile Eurozone economy. Meanwhile, the British Pound (GBP) is also in the crosshairs, complicating the Bank of England's policy outlook just as inflation data appeared to be stabilizing.

EU Prepares “Strong Response”

European officials have reacted swiftly. German Finance Minister Lars Klingbeil stated on Monday that the European Union is preparing a “strong response” to the tariff threats. Emergency meetings are reportedly underway in Brussels to draft a retaliatory package, potentially targeting $108 billion worth of US exports.

Market analysts warn that this tit-for-tat escalation could mirror the trade tensions of 2018 but with higher geopolitical stakes.

Safe Havens and Commodities

The geopolitical uncertainty has provided fresh fuel for precious metals. Gold has entered what analysts describe as a “skittish bird” mode, reacting sensitively to every headline, while Silver surged 12% last week. With the US Dollar facing conflicting drivers—safe-haven demand versus the long-term risk of isolationism—commodities remain the clearest beneficiary of the turmoil.

Investors are now turning their attention to the upcoming Davos Forum, where Trump is expected to confront European leaders face-to-face, potentially deepening the diplomatic rift.