Tariff Threat and EU Response
U.S. President Donald Trump has threatened the United Kingdom and a group of countries in the EU with adding 10% tariffs as part of the broader effort to purchase Greenland. The tariff threat affected EU members, including Denmark and Norway, that had rallied behind Greenland.
U.S. President Donald Trump has threatened to raise tariffs on the EU by 10%, bringing the current rate to 25%, if the two fail to reach a permanent solution. The tariffs stem from the EU’s conflicting stance on Trump’s obsession with Greenland and Europe’s potential countermeasures, which could significantly affect trade between the two countries.
Economic Impact of Tariff Increase
Tariff increase will stifle trading activity
According to analysts at the global financial institution Goldman Sachs, the 10% tariff increase could reduce trading activity, causing a drop in real GDP in affected countries from 0.1% to 0.2%. The analysts predict that Germany will take the most damage at about 0.2% if it’s an incremental reciprocal tariff and 0.3% if it’s a blanket levy following the tariff deployment.
Sven Jari Stehna said the hit could be worse if the impact sends a ripple through financial markets. The tariff increase has drawn backlash from Republicans in America, including U.S. senators Thom Tillis and Lisa Murkowski.
Both Tillis and Murkowski sharply criticized the tariff proposal until the U.S. is given the green light to purchase Greenland. A recent X post by Murkowski noted that the tariffs were unnecessary and a mistake after NATO allies deployed Military forces to the island in response to the threat.
Global Market Reactions and Potential Solutions
Global markets react after Trump’s tariff threats
The escalating tensions have heated global financial markets, sending EU stocks and U.S. indices lower on Monday morning. On the other hand, safe havens like Gold and Silver rallied while risk assets like Bitcoin fell sharply.
Analysts believe the likelihood of Trump implementing the additional tariffs remains low, and the current market sentiment is likely to be short-lived. The strategists also said that there exists a high chance that the UK and the U.S. will initiate negotiations to find a diplomatic solution to the ongoing crisis.
However, anonymous sources suggest the EU is currently in deep discussions to impose tariffs on €93 billion ($108 billion) worth of goods from the U.S., with additional measures beyond tariffs. Other people familiar with the matter said the bloc will initially pursue diplomatic measures to reach a consensus with the U.S. Goldman Sachs’ analysts also predict that the ongoing tension could have a small impact on inflation. They expect the central banks of the affected countries to lower interest rates to respond to the GDP outlook.
The U.S. government logged $264 billion in tariff revenue in 2025, a 234% increase from 2024. The monthly average of the second half of the year peaked at $30 billion, according to a previous report by Cryptopolitan.