BREAKINGVIEWS-Slowcoach summitry is EU asset in Greenland spat

By Jon Sindreu

LONDON, Jan 20 (Reuters Breakingviews) - U.S. Treasury Secretary Scott Bessent doesn’t have many nice things to say about European Union leaders or the speed of their economic response to Donald Trump’s Greenland related tariffs. “I imagine they will form the dreaded European working group first,” he told reporters Tuesday. His mockery hits the mark, but perhaps at the wrong time: in fact, slow and unintentionally ineffective summitry could prove a secret weapon against Trump’s threats.

Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom have already made the bold geopolitical move that was required: sending small contingents of soldiers to Greenland. Officially, this was meant to ease U.S. concerns about the island’s defense. Still, it’s undeniable that it also raises the cost of a potential military invasion that Trump has refused to discard. In response, he has threatened extra import tariffs on goods from the offending countries.

Trump likely hopes to divide EU leaders, who have scheduled — don’t be shocked — a summit for Thursday. Their response could involve 93 billion euros of retaliatory tariffs and the EU’s Anti Coercion Instrument, which could constrain American technology giants' single market access. Still, non affected nations such as Italy are likely to push for a more diplomatic approach.

Counterintuitively, a deadlock could actually be a good outcome. That's because time isn’t on Trump’s side. A looming Supreme Court ruling could soon strike down his ability to use emergency economic powers to impose tariffs. Polls suggest tariffs and the annexation of Greenland are increasingly unpopular at home, heightening pressure on the Republican Party ahead of the midterm elections in November. Also, Trump’s tariff threats often get watered down, meaning escalation now could backfire.

Assuming the U.S. president won't risk a direct military confrontation with NATO allies — after all, if he does then wrangling about tariffs becomes irrelevant — he may ultimately settle for an agreement involving Greenland and its minerals, or even concessions involving Ukraine. He might also simply get distracted.

The key backdrop here is that, even if Trump proceeds with a 10% tariff on February 1 and a 25% rate on June 1, the damage would probably be limited. Targeting only part of the EU single market is difficult, as goods would likely be rerouted through unaffected countries. Washington could play whack-a-mole across the bloc, but that would only strengthen EU unity. And even under blanket tariffs and one for one retaliation, eurozone GDP growth this year would fall by less than 0.4 percentage points, Oxford Economics forecast on Monday. Note that economists have tended to overestimate tariff impacts over the past year.

EU leaders may feel reasonably irked by Bessent urging them not to retaliate while simultaneously calling them chicken. In this case, however, they could do worse than giving him a dose of that good, old-school European inaction.

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CONTEXT NEWS

U.S. Treasury Secretary Scott Bessent on January 20 told reporters at the World Economic Forum in Davos that the European Union’s slow decision-making was an impediment to the bloc mounting an effective response.

President Donald Trump said on January 18 he would slap an additional 10% import tariff on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom unless the United States is allowed to buy Greenland. The tariffs would take effect on February 1, increase to 25% on June 1 and continue until a deal was reached, Trump wrote on social media.

Some European countries responded on January 19 by drawing up retaliatory measures, potentially including 93 billion euros of their own tariffs and deploying the "Anti-Coercion Instrument" approved by the European Union in 2023, which permits restricting investments and services exports.

As of 0900 GMT on January 20, the Stoxx Europe 600 was down 1.2%, and the euro was trading at $1.1715, a 0.6% increase from a day earlier.