#TrumpWithdrawsEUTariffThreats

In a surprising turn in transatlantic relations this week, U.S. President Donald Trump announced that he is withdrawing his previously threatened tariffs on several European countries, including members of the European Union and the United Kingdom, after escalating tensions over Greenland and Arctic policy at the World Economic Forum in Davos, Switzerland on January 21–22, 2026. Over recent days, markets and governments reacted strongly when Trump had initially announced plans to impose 10% tariffs on imports from eight allied nations Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the UK starting February 1, with the threat of raising them to 25% by June unless those countries backed U.S. demands linked to Greenland, a Danish territory seen by the Pentagon and White House as strategically vital in the Arctic. This brinkmanship had sparked political outcry, prompted the European Parliament to pause approval of a major U.S.–EU trade deal, and rattled global markets as stock indexes dipped on fears of a widening trade war.
However, the situation de‑escalated sharply when Trump, speaking and posting on social media from Davos, said that after meetings with NATO Secretary-General Mark Rutte and other leaders he had “formed the framework of a future deal” regarding Greenland and the wider Arctic region, and as a result he would “not proceed with the planned tariffs.” By publicly backing off the tariff threats, he also clarified that he would no longer pursue using force to seize the territory, repeating that diplomatic engagement and negotiations would be the path forward, albeit while continuing to emphasize U.S. strategic interests in the Arctic. His comments led to a strong rebound in European equities with the STOXX 600 logging its biggest daily gain in nearly two months and major U.S. indices like the S&P 500 moving higher on improved investor sentiment.
The reversal was welcomed by many European leaders who had pushed back against both the tariff threats and the idea of coercive measures tied to Greenland’s sovereignty, with officials stressing that Denmark’s control over Greenland was a non‑negotiable red line. At the same time, some commentators have noted that while the tariff threat has been paused, underlying tensions over broader trade and security issues remain unresolved, and diplomatic trust on both sides will take time to rebuild. In response to the tariff withdrawal and evolving dialogue, the European Commission also announced a proposal to suspend a previously planned €93 billion retaliatory trade package for six months to keep diplomatic channels open, though these countermeasures can be reactivated if necessary in the future.
Economists and analysts are studying the implications of this episode on long‑term U.S.–EU trade relations, noting that both sides have powerful economic incentives to avoid a damaging tariff war given the scale of transatlantic commerce. While the retreat from tariff threats has eased immediate market stress and opened space for renewed cooperation, questions remain about how future disagreements on strategic issues like Arctic policy, defense spending, chip subsidies and broader global trade rules will be managed without escalating into protectionist standoffs. Ultimately, Trump’s decision to withdraw the threat of EU tariffs has shifted the focus back toward negotiation, alliance frameworks, and economic partnership, even as scepticism about political volatility in U.S. trade policy persists among European policymakers and investors alike.