Trade 'bazooka': How Europe could retaliate against Trump's aggressive Greenland push, tariff threats

US President Donald Trump has escalated a standoff with Europe, America's all-weather allies.

The US president's aggressive push to take control of Greenland — has strained Nato unity and revived fears of a transatlantic trade war.

Europeans, for their part, are dusting off their trade "bazooka", as their way of retaliating against Trump's tariffs, due on February 1.

Nato is a 32-nation mutual-defence alliance created in 1949, which has anchored post-World War II rebuilding and global relations.

Trump has now linked his Greenland campaign to his failure to win the 2025 Nobel Peace Prize, saying the snub freed him from thinking “purely of Peace” as tensions with Europe intensify.

Trump is set to appear at the World Economic Forum (WEF) in Davos this week (January 19-23) personally.

Last year, days after his second inauguration, Trump delivered a punchy speech to Davos via video link, in which which he threatened across-the-board tariffs, and urged Nato countries to raise defence spending.

In an interview with NBC News, he refused to rule out the use of force to seize the Arctic island.

He also reiterated threats to impose sweeping tariffs on European allies if they do not agree to a "deal".

What could Europe do in return?

Nato alliance under strain

Trump’s intensified pressure on Denmark — a fellow Nato member — has alarmed European capitals.

The dispute comes as the alliance is already strained by the war in Ukraine and Trump’s long-standing insistence that allies increase defence spending or risk losing US protection.

Danish officials rejected Trump’s demands outright.

Foreign Minister Lars Løkke Rasmussen said, “You can trade with people, but you don’t trade people,” while Greenland’s Prime Minister Jens-Frederik Nielsen stressed that the territory must be allowed to decide its own future under international law.

Denmark’s military confirmed that Danish troops were deploying to western Greenland this week as part of a scheduled Arctic exercise, underscoring the rising security tensions.

Europe’s “trade bazooka”

Trump has vowed to impose escalating tariffs from February 1 on Denmark, Sweden, France, Germany, the Netherlands, Finland, Britain and Norway unless the US is allowed to buy Greenland, home to just 57,000 people.

The threat has rattled European industry and financial markets, reviving memories of the volatile 2025 trade war, which only eased after mid-year tariff deals.

In response, the European Union is preparing possible retaliation, which European media calls "trade bazooka".

EU leaders will meet at an emergency summit in Brussels on Thursday to consider:

• Tariffs on €93 billion ($108 billion) of US imports, which could automatically take effect on February 6 after a suspension period expires.

• Activation of the Anti-Coercion Instrument (ACI) — a powerful, never-before-used tool that could restrict U.S. access to EU public contracts, investment, banking services, or digital trade, where the U.S. runs a surplus.

The European Commission said it continues to engage Washington “at all levels” but confirmed the ACI remains an option.

Davos diplomacy — or showdown?

Several European leaders are seeking talks with Trump in Davos. Norwegian Prime Minister Støre and German Chancellor Friedrich Merz both said they would try to meet him, though Merz warned Europe would respond if tariffs are imposed.

US Treasury Secretary Scott Bessent cautioned Europe against retaliation, dismissing claims that Trump’s actions are motivated by the Nobel Prize and insisting Greenland is a “strategic asset” for U.S. security.

British Prime Minister Keir Starmer called for calm dialogue and said he did not believe Trump was planning military action.

Flashpoint for trade and security

While Russia declined to comment directly, it noted that Trump would “go down in world history” if he succeeded in taking Greenland — a remark underscoring how the dispute has become a global flashpoint.

What began as an unconventional territorial demand has now evolved into a convergence of personal grievance, strategic rivalry, trade coercion, and alliance tension — threatening both EU-US trade relations and the foundations of Nato itself.