Submitted by Thomas Kolbe
The defiant reaction of Germany’s business and political elite to Donald Trump’s tariff measures in the Greenland conflict reveals a remarkable denial of reality. It is increasingly clear that Brussels and Berlin are more willing to accept significant collateral damage in a dispute with the United States than to pursue rational solutions. It is high time to acknowledge their own weaknesses.
In the end, the dispute over Greenland’s strategic future unfolded as expected. In response to the deployment of a tiny contingent of European troops to the Danish-administered island, Washington wielded a substantial lever: trade tariffs. This now well-established tool is aimed at the eight nations participating in the action – including Germany, which contributed a mere 13 soldiers to this peculiar measure.
Starting February 1, an additional 10 percent tariff will take effect. If the situation remains unchanged, it will rise to 25 percent on June 1. Should the Greenland dispute escalate into a trade casus belli, it will directly impact the overall economy. Export-heavy economies like Germany could see up to 0.3 percent of their GDP wiped out.
Shipping Routes and Resources
What is this conflict really about? Donald Trump’s interest in Greenland’s strategic control is twofold. On one hand, Greenland’s rich natural resources – particularly rare earths – are crucial. On the other, it’s about controlling key Arctic shipping routes. Washington’s focus is on dominating the Northeast Passage along Russia and the Northwest Passage along Canada. These routes linking Europe, Asia, and North America could become strategically vital in the future. The Davis Strait between Greenland and Canada also plays a key role in the U.S. power game, providing access to significant resource zones. The North Atlantic region is generally considered essential for the U.S. government’s military security.
In recent days, Trump repeatedly emphasized that neither NATO nor the European Union had taken substantive political action in response to China’s and Russia’s growing influence in the region.
This raises the inevitable question: why is Europe suddenly so interested in Greenland? A clean resolution would undoubtedly be a referendum on the partially autonomous island. How this process will develop remains to be seen.
Defiance Instead of Strategy
Germany’s business and political responses indicate a willingness to escalate rhetorically. Representatives of German trade associations speak of a “U-turn” in U.S. policy. VDMA President Bertram Kawlath criticized the tariffs as politically motivated, calling the new demands absurd. Similarly, DIW President Marcel Fratzscher warned that Germany and Europe should no longer allow themselves to be extorted in the trade dispute with the U.S.
BGA President Dirk Jandura and VDA President Hildegard Müller labeled the announced tariffs grotesque. They would place an enormous burden on an already heavily affected European industry. Both called on Brussels to act decisively and strategically.
Notably, Fratzscher’s call for closer cooperation with China stands out. Yet only weeks ago, the rare earth supply dispute with Beijing nearly escalated – a player that enforces its interests just as ruthlessly using its resource leverage.
There is agreement that Brussels must now pick up the gauntlet thrown by the U.S. EU Commission President Ursula von der Leyen announced negotiations for a retaliatory tariff package, which could hit U.S. businesses in Europe with up to €93 billion. The signs point to a storm, but it remains unclear whether the U.S. administration will be impressed.
From a European perspective, two main options emerge: first, the long-discussed model of heavily taxing American tech companies – the so-called digital tax – could finally be implemented. Second, EU-proposed counter-tariffs could be used to apply pressure in upcoming negotiations with the U.S. administration.
The crucial question: how far can the EU play this power game before the economic costs become unbearable? Brussels has shown a tendency in conflicts like the Ukraine war to stick to maximalist demands while accepting significant collateral damage. The same dynamic now threatens in the trade dispute with the U.S.: European rhetoric is strong, but economic substance is vulnerable.
Much like in its standoff with Russia, the EU faces a visible power asymmetry against the U.S. economy, which grew at an annualized 5.5 percent in the last quarter while unemployment fell to 4.4 percent. Growth is driven primarily by private investment and a massive gain in productivity – the true measure of sustainable economic success.
By contrast, the EU – and Germany’s industrial heartlands in particular – are bleeding. Despite massive borrowing and extensive government stimulus programs, private investment and productivity gains remain elusive.
Power Asymmetry
Over the slowly escalating trade conflict hangs the Damocles sword of the Ukraine conflict and Germany’s associated energy crisis. The missed opportunity months ago to resolve a Gordian knot with U.S. mediation now exacts its toll. Step by step, the United States could adjust its security guarantees for Europe, exposing the EU’s economic and military vulnerabilities.
Washington’s new security strategy, released in December, makes it clear that the EU is no longer regarded as a strategic ally. Instead, the U.S. is prepared to pursue its own interests with an iron hand if necessary.
There is no denying it: under the current administration, realpolitik is back in the EU-U.S. relationship. Europe must recognize these new realities and approach them with a realistic assessment of its own position. And the current economic situation is anything but rosy.
Moral posturing over the supposed “Wild West methods” of the Americans is hypocritical. Was it not the EU Commission that, over many years, forced trade partners – most recently the Mercosur countries – under its climate-protectionist regime? Is it not at least equally problematic to drive one’s own population into economic hardship to enforce climate-socialist power fantasies and expand political control?
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About the author: Thomas Kolbe is a German graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.
