European leaders are taking Trump’s Greenland threats seriously but are uncertain on the ultimate goal. They could offer ‘carrots’ in the form of a greater US military and commercial presence on Greenland. A united European front will be key, with an emphasis on territorial sovereignty and NATO’s importance, Standard Chartered's economists Christopher Graham and Philippe Dauba-Pantanacce report.

Greenland tensions to test NATO unity

"President Trump has made clear that he wants the US to control Greenland for national security purposes, signalling that both financial and military means could be used. Any military action would pose an existential threat to NATO given that Greenland is an autonomous territory of Denmark, a NATO and EU member. That said, EU leaders may have varying interpretations of Trump’s threats. While some may take them at face value, others may see them as a bargaining chip to increase the US military presence on the territory, gain control of rare-earths extraction, or push European allies into shouldering more of the security burden."

"Europe is likely to respond with a combination of incentives and deterrents presented via diplomatic channels. Incentives could include an enhanced US military and commercial presence on Greenland, potentially giving the US the right of refusal to third parties operating in the territory. Europe may also seek to bolster NATO involvement on Greenland and in the Arctic region to address Trump’s security concerns and reduce the rationale for a takeover; this would also make a hypothetical US military takeover more complicated. It will be key for European leaders to present a united front – particularly in articulating to the US what the full consequences of a breakdown of NATO could be, both militarily and economically."