Trump's Greenland Tariffs: Europe Braces for Limited Economic Impact
Europeans have grown accustomed to tariff threats from President Donald Trump. They understand his approach. He uses tariffs as fees for market access, leverage for American interests, and punishment for perceived offenses. Since his return to office, European businesses have prepared. They have adjusted supply chains, sales contracts, and distribution channels.
Current Tariff Landscape
Currently, EU exports to America face a 15% tariff. British goods are taxed at 10%. Trump's new threat adds a 10% levy on Nordic countries, Germany, France, the Netherlands, and Britain. This move responds to their deployment of a small number of troops to Greenland. It is another nuisance for European traders. However, the impact remains contained if escalation is avoided.
The EU exported goods worth €523 billion to America in the third quarter of 2025. This figure represents about 2.8% of the bloc's GDP. Imports from America reached €360 billion. Exports declined from €547 billion a year earlier. Imports grew from €336 billion. Pinpointing the exact effect of tariffs on this decline is challenging.
Who Bears the Cost?
American importers and consumers appear to shoulder most of the tariff burden. A study by the Kiel Institute, a think-tank, reveals a striking finding. It shows that American entities absorbed 96% of the current tariffs. European firms' prices remained largely unchanged.
Quick analysis by researchers indicates the new 10% Greenland tariffs would have a minimal effect. They would shave just 0.04% from the EU's output and 0.02% from America's. Should Trump increase tariffs to 25% by summer, as threatened, costs would rise slightly. The EU would face a 0.08% impact, America 0.06%. These figures hardly signal a recession.
Sector-Specific Vulnerabilities
Some European sectors face greater exposure to American tariffs. Politicians feel pressure to respond. Total American imports of industrial equipment increased by 11% between April-October 2024 and the same period in 2025. However, imports from Europe, including Britain, fell by 4%.
The picture is similar for vehicles like cars, rail carriages, boats, and planes. American imports nosedived by 17%. The fall from Europe was more severe at 32%. This decline may partly reflect corporate adjustments to existing tariffs.
Large global companies have tweaked their supply chains. They now serve the American market from other countries or through local assembly. Morgan Stanley estimates that most revenue from America for European goods companies comes from local production or assembly.
Analyzing Major European Firms
To gauge exposure, we examined around 80 big companies from the eight targeted countries. Their combined revenue generated in America reached about $1.1 trillion last year. This sum represents roughly a quarter of their global total.
Healthcare firms appear most exposed by sales. For those in our panel, American sales average about 40% of total revenue. Drugmakers show an even higher dependence. For GSK and Novo Nordisk, American sales accounted for about half of their total last year. Many pharmaceutical firms currently enjoy tariff exemptions. It remains unclear whether this protection would continue under new levies.
We estimate only 27% of the healthcare sector's costs are in America, compared to 40% of its revenues. This gap is greater than in other sectors. Novo Nordisk, for instance, maintains a relatively small operational footprint in America despite hefty sales there.
Carmakers also face significant risk. The five carmakers in our sample receive a combined $200 billion from American sales. This amount constitutes 23% of their total revenue. Firms selling cars in America without local factories are particularly vulnerable.
Audi's sales in America dropped by 27% in 2025. Porsche faces similar challenges. Its American sales ticked up slightly last year. However, rising tariffs contributed to a disastrous year for the luxury carmaker. Its operating profits fell by a staggering 90% in 2025.
Europe's Retaliation Strategy
Europe may retaliate. In March, the EU prepared tariff retaliation on €21 billion worth of American goods. This move aimed to counter Trump's proposed levies on metals. Later, the EU added €72 billion worth of targets to counter his "Liberation Day" tariffs announced in April.
The combined retaliatory set was put on hold after the EU's truce with Trump. That agreement resulted in the current 15% tariff on EU goods. However, this truce may now be shelved. That would put the retaliatory measures back into play.
American sectors were chosen strategically. The goal was to maximize pain for Trump while limiting damage to Europe. Targets included goods with European competitors, like Irish whiskey replacing Kentucky bourbon. Items made in Republican districts were also selected.
Potential Escalation Beyond Tariffs
Should the economic war expand beyond tariffs, the situation becomes more volatile. The EU's retaliation list already contained a ban on scrap metal sales, which American smelters rely on. Export controls could extend to sectors where American firms struggle to replace European suppliers.
The German Economic Institute estimates that for 532 item groups, the EU's share in American imports exceeds 95%. This dominance includes critical areas.
- Aircraft: Only Airbus, Europe's planemaker, is a true contender.
- Lithography machines: ASML of the Netherlands holds a monopoly for advanced chipmaking.
- Military helicopters, various chemicals, and foodstuffs also show high EU import dependence.
Digital and services sectors represent largely uncharted territory for a full trade dispute. The EU already regulates American companies' access to its market. Attempts to contain their market power or regulate content have provoked furious responses from tech firms and Trump. The EU could tighten the screws further. It could push American tech giants out of government tenders. Financial firms' access to the European market could also face new curbs.
Financial Leverage and American Countermeasures
Europeans hold vast amounts of American assets. This might seem to provide leverage. However, mass dumping of tech shares or government bonds looks highly unlikely. Governments lack the legal power to dictate private investors' asset allocation. Taxing such holdings might be workable but could lower asset values. Finding buyers for a large-scale sell-off would also pose challenges.
America possesses ample means to respond. Export controls on military equipment could harm Europe's own military production. Digital retaliation could undermine Europe's ability to use American cloud providers. The dominance of the dollar and America's financial system could be weaponized against European banks and businesses. The threat to cut off Ukraine from American equipment and intelligence lingers in the background.
The Balance of Power
However you analyze it, America holds more leverage over Europe than vice versa. There is one potential exception. This summer, America co-hosts the FIFA World Cup with Canada and Mexico. Only European and South American countries have ever won the competition. They are the star attractions. A European boycott would strike a blow to Trump's pride at little economic cost. For now, Europe watches and prepares, calculating that Trump's Greenland tariffs are a nuisance, not a catastrophe.
