At the World Economic Forum in Davos, President Trump informed attendees he wouldn’t use military force to acquire Greenland—news that let the world exhale in relief. However, he continues to threaten tariffs on Europe should Denmark decline to sell the territory to the U.S.
Trump’s plan has . “Being a happy vassal is one thing. Being a miserable slave is something else,” Belgian Prime Minister Bart De Wever said. French President Emmanuel Macron said Trump’s “endless accumulation of new tariffs” were “fundamentally unacceptable.” Meanwhile, European Commission President Ursula von der Leyen from the U.S. and to make that independence “permanent.”
But does Europe possess sufficient economic tools to make the White House reconsider?
Possibly, say Wall Street analysts.
Below are seven strategies the EU could use to economically harm the U.S. if Trump won’t accept “no” regarding Greenland, per research from George Saravelos of , , Macquarie’s Thierry Wizman and Gareth Berry, and Pantheon Macroeconomics’ Samuel Tombs and Oliver Allen.
- Cut the flow of foreign direct investment into U.S. bonds and stocks by encouraging investors to keep their capital within Europe. “European nations hold $8 trillion in U.S. bonds and equities—nearly double the amount owned by all other countries combined,” Saravelos advised clients recently.
- Enforce the $100 billion in tariffs on U.S. imports that were initially proposed but later set aside after the EU agreed to a tariff pact last year.
- Leverage the Digital Services Act to impose additional restrictions on the operations of U.S. tech firms.
- Put the “Buy European” initiative into effect to steer more government procurement toward European suppliers.
- Deploy the Anti-Coercion Instrument (ACI) to levy tariffs on U.S. service providers and firms connected to the U.S. government. The ACI would effectively bar U.S. service companies from operating in Europe—and Europe already runs a trade surplus with the U.S. in services. This tool is frequently called Europe’s trade “bazooka.”
- “Impose export taxes on EU goods shipped to the U.S. that are difficult to substitute—like chip-manufacturing equipment or specialized machinery,” Macquarie notes.
Denying the U.S. access to Dutch semiconductor firm ASML (which holds a near-monopoly on certain technologies) would pose logistical hurdles for numerous U.S. tech companies. - Apply sanctions to U.S. companies doing business in Greenland.
“The U.S. has a critical vulnerability: it depends on others to finance its large external deficits. Europe, by contrast, is America’s biggest creditor—European nations own $8 trillion in U.S. bonds and equities, nearly double the total of all other countries combined. In a context where the geoeconomic stability of the Western alliance is under existential threat, it’s unclear why Europeans would remain so willing to fulfill this role,” Saravelos told clients in .
Trump isn’t expected to accept this passively. Klement stated on his Substack: “Naturally, these actions will prompt Trump to escalate in the short term—which is why some EU leaders, like Germany’s Friedrich Merz, are currently working to moderate the EU’s response.”
“But 2025 also demonstrated that if countries stand their ground, the escalation cycle ends within a few weeks—and Trump backs down (or should I say ‘backs off’?) once he realizes he can’t bully others into complying,” he added.
Macquarie analysts cautioned that a full set of economic sanctions against the U.S. would drive up price inflation in America. “The EU has the ability to retaliate economically, and might do so hoping that a strong EU response (to U.S. threats or military action) will end the escalation after a few weeks—and that this risk is worth taking. What exactly can the EU do? It can take actions sufficient to harm the U.S. economy and security, and these trade-related measures would likely push inflation higher together,” they explained.
Tombs and Allen note that the ACI “bazooka” won’t cripple the U.S., but it could cause pain. “U.S. service exports to the EU reached $295 billion in 2024—equal to 0.9% of U.S. GDP—indicating the damage could be far more significant if the EU uses this relatively new tool at its disposal instead of just responding with tariffs, though the EU’s own economy would suffer more as well,” they told clients.