In a dramatic turn of events, the potential conflict between the United States and its European allies over the annexation of Greenland has been defused, thanks to the EU’s strategic use of economic leverage. The past few weeks have seen a remarkable escalation in the transatlantic relationship, with President Donald Trump threatening to impose tariffs on countries that stood in the way of his Greenland annexation plans.
However, after a meeting with NATO Secretary-General Mark Rutte, Trump backtracked on his threats, marking a significant victory for European diplomacy. As European leaders gathered in Brussels for a post-crisis debrief on 22 January, they congratulated themselves on their unity and appreciated Rutte’s “Daddy diplomacy” in handling the situation.
The key to Europe’s success was its willingness to dangle the possibility of retaliatory measures worth a staggering $93 billion, making the markets jittery and forcing Trump to back down. This demonstrated that the EU can use its economic power to its advantage, flipping the script on its dependence on the US.
The crisis also exposed the EU’s struggle to equip itself with the necessary tools to wield economic leverage in a political manner, akin to the US and China. While the EU’s commitment to the rule of law sets it apart from more authoritarian states, appropriate economic statecraft and strategy could still allow Europe to punch above its weight on the global stage.
The reluctance to activate the EU’s new anti-coercion instrument, which would have allowed the European Commission to establish whether a foreign power was using economic coercion and take proportionate measures, was more about unwillingness to cede national sovereignty than about making economic and political tools work in tandem.
The Greenland debacle has also highlighted the divisions within Europe on how to handle the US, with a cognitive dependence on the transatlantic relationship and the presence of pro-Trump factions complicating the EU’s unified response. However, the lesson from this crisis suggests that Europe can turn this cacophony into “strategic ambiguity,” keeping antagonistic powers uncertain about the full scale of the EU’s response and leveraging its sophisticated toolbox.
As European leaders ponder the path forward, the Greenland crisis has demonstrated that statesmen understand only strength, and the EU must be willing to use its economic might to assert its place on the global stage.
