Trump’s “forcible seizure of Greenland”; Europe begins considering “anti-coercion instruments”—is a “capital war” about to break out?

On January 17 local time, following Trump's announcement on Truth Social, transatlantic alliance relations suddenly became tense again.

According to CCTV News, U.S. President Trump stated that starting February 1, a 10% tariff will be imposed on all goods exported to the United States from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, until an agreement is reached on the “full and complete purchase of Greenland.”

This is not a vague pressure tactic, nor a traditional trade negotiation. Trump directly linked tariffs to the “purchase of territory,” targeting longtime European allies. This statement was quickly characterized by Europe as an unacceptable act of political coercion.

In Wall Street’s view, this move is about more than just Greenland’s underground rare earths or Arctic strategic routes—it may be a carefully calculated “election performance.” And this time, Europe doesn’t want to just protest—perhaps they really are seriously considering starting a “capital war.”

A “Clear Escalation”: From Trade Tool to Geopolitical Pressure

HSBC, in its latest research report, unusually pointed out directly that Trump’s statement “clearly marks a major escalation,” not just in terms of the tariffs themselves, but in his willingness to use hard power against historical allies to advance his aim of acquiring Greenland.

This characterization is critical.

For years, markets have grown accustomed to Trump using tariffs as bargaining chips, but this time, the difference is: tariffs are no longer serving trade terms, but are explicitly being used as leverage in territorial deals. This means the core dispute has shifted from economic issues to geopolitical and sovereign ones.

Trump also mentioned in his post that several European countries recently dispatched small troop units to Greenland, claiming their purpose was “unclear,” and warned that these countries were “playing a very dangerous game.” From Europe’s perspective, such remarks further amplified the antagonism.

Why Now: The “Return of Uncertainty” Under Midterm Election Pressure

From an economic logic standpoint, this move is hard to interpret as a well-considered trade strategy.

HSBC noted in its report, as with many policies announced via social media, this tariff threat “involves a large number of crucial unknowns.” For instance, will the tariff be added to existing rates? Will there be exemptions? What is the legal basis? These remain unclear.

But what the market truly worries about is not the details but the direction.

At the start of the year, HSBC judged that European firms in 2026 might regain confidence in an “environment of relatively low tariff volatility.” Yet Trump’s statement has directly shattered this expectation. The report bluntly states that this change “turns hopes for a stable trade environment into illusions,” and pulls the European economy back into a world dominated by tariff threats, delayed execution, and uncertainty.

This is typical in the midterm election cycle:

Policies may not ultimately be implemented, but uncertainty itself has already begun to impact corporate decisions, trade, and investment sentiment.

According to analyses by Song Xuetao at Guojin Macro and others, Trump's Republican Party currently faces enormous pressure in the midterms, with an 80% probability of losing the House of Representatives. Amid weak domestic performance, Trump urgently needs to create a sufficiently dramatic external crisis to shift attention, rouse nationalist sentiments, and reap votes.

From grabbing oil in Venezuela to now trying to seize Greenland, market analysts have dubbed this “Trump Doctrine” (Trump + Monroe Doctrine). Trump accuses European states of sending troops to Greenland for “uncertain purposes” and playing a “dangerous game”—though crude, this rhetoric is effective with voters.

Europe’s Response: From Vocal Opposition to Institutional Counterattack

Politically, Europe’s top leaders quickly voiced their positions.

According to CCTV News, European Commission President Ursula von der Leyen warned the move would “undermine transatlantic relations and potentially trigger a dangerous vicious cycle”; French President Macron said “any threat or intimidation will not impact us”; while UK Prime Minister Starmer called it “completely wrong.”

But what truly caught the market’s attention was not these statements, but rather Europe’s internal deliberations over upgrading its countermeasures.

Goldman Sachs later pointed out in its analysis that the EU might pursue three levels of response.

The mildest option is to shelve the previously negotiated EU–US trade agreement. The agreement needs parliamentary approval, and in the current climate, many MEPs have publicly stated “it is not suitable for ratification at this time.”

Second, Europe could employ the reciprocal retaliation list prepared last year and impose tariffs on US goods. This method is familiar to markets and has limited economic and political marginal impact.

The real change appears in the third option.

Anti-Coercion Tools Emerge: Europe Seriously Considering a “Capital War”

HSBC and Goldman both mention that within the EU (including President Macron and many parliament members), there are calls to deploy the Anti-Coercion Instrument (ACI). This tool is designed for situations when “a third country tries to coerce the EU or its member states via economic means.”

Unlike traditional tariffs, the ACI is not a single trade retaliation tool. According to Goldman, it allows the EU to carry out a series of non-tariff countermeasures, including but not limited to:

restricting investment, limiting access to public procurement markets, imposing taxes on foreign assets and services, and even actions related to digital services and intellectual property.

Restrict Investment: Block US market access in the EU.Public Procurement Restrictions: Ban US firms from EU government procurement.Intellectual Property Restrictions: Limit related IP protection.Asset Taxation: Goldman notes ACI could even tax US assets or digital services.

It’s worth noting that initiating ACI does not mean immediate countermeasures. Goldman says the process itself requires several steps. Nevertheless, the signal from launching ACI is extremely strong: it means the EU is no longer limited to “reciprocal tariffs,” but is considering responses at the level of capital, rules, and institutions.

This is why the market is starting to discuss a previously less-considered issue—whether Europe, for the first time, has an institutional toolbox to engage in confrontation at the capital level.

European Economic Impact: Growth Under Pressure, but Inflation Is Not the Core Issue

From a purely economic perspective, the reports draw relatively measured conclusions.

Goldman estimates if the 10% tariff is ultimately enacted, it will, via the export channel, lower actual GDP by about 0.1% to 0.2% in affected countries. Germany would suffer a bigger shock, the overall eurozone and UK GDP would be dragged down by about 0.1%. If the rate rises to 25%, the GDP impact could expand to 0.25% to 0.5%.

But on inflation, Goldman believes:

Absent strong countermeasures, the tariff's impact on inflation is “very small”, mainly because weak demand itself suppresses prices. Based on simple Taylor rule calculations, monetary policy might even point to a “slightly lower policy rate.”

HSBC also notes that in the past year, since Europe has barely retaliated, tariffs in many cases have presented a mildly deflationary effect via exchange rate and demand channels.

What Markets Are Really Pricing In Is “Uncertainty”

Overall, the core impact of this tariff dispute over Greenland is not a one-off adjustment of rates, but the renewed rise of trade and geopolitical uncertainty.

Under midterm election pressure, tariffs could repeatedly change, policies could swing, exemptions could be granted or cancelled at any time. For investors, this means higher risk premiums, increased volatility, and a reassessment of transatlantic asset allocation strategies.

Once tariffs are used to barter territory, what the market faces is no longer normal trade friction, but institutional and geopolitical risks directly entering the asset pricing system.

HSBC data shows that the geopolitical risk premium has begun to be included in asset prices. The euro has already fallen over 1% against the dollar within the year, and as the “ultimatum” date of June 1 approaches, volatility in the dollar index, commodities, and precious metals will increase significantly.

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