In a bold move, US President Donald Trump has threatened to escalate tariffs against the UK and other European allies who oppose his plans to acquire Greenland. The President has cited the island’s strategic Arctic location and mineral wealth as key motivations behind this controversial proposal.
Sir Keir Starmer, the leader of the UK’s Labour Party, has urged the US to avoid any military action or trade war, calling for the issue to be resolved through “calm discussion between allies.” However, Mr. Trump has made it clear that the UK could face additional tariffs as soon as next month if it maintains its opposition to the Greenland acquisition.
Tariffs are essentially taxes imposed on imported goods, which are typically charged as a percentage of the price paid by the buyer. In this case, it means that US firms would have to pay more for international goods from affected countries, including the UK. The tariffs are collected by the national customs authority, in the UK’s case, Her Majesty’s Revenue and Customs (HMRC).
Experts suggest that the wider economic impact of Mr. Trump’s tariff threats could be “modest,” but still significant enough to knock a few tenths of a percentage point off the GDP of the most exposed economies, such as the UK and Germany. Capital Economics’ chief economist Neil Shearing estimates that a 10% tariff could reduce GDP in these economies by around 0.1%, while a 25% tariff could knock 0.2-0.3% off their output.
The sectors most affected are likely to be those with the largest export shares to the US, such as machinery, including cars, engines, and turbines. Certain consumer sectors, like Scotland’s whisky industry, which exported nearly £1 billion worth of whisky to the US in 2024, could also be particularly vulnerable.
The introduction of tariffs is often inflationary for both the countries affected by the measure. Economists at Deutsche Bank have suggested that the “renewed threat of trade war, however, could disrupt the UK’s swift disinflation process,” in which inflation dropped to 3.2% in November last year.
As the UK and its European allies continue to resist Mr. Trump’s Greenland ambitions, the potential economic fallout from the resulting trade dispute remains a significant concern for businesses and policymakers alike.
