US threats to buy Greenland spark trade war rumors

A US move to seize Greenland could harm trade relations with the European Union, France’s finance minister has warned, as an analyst told CNBC that tariffs or economic sanctions could lead to a “trade war”.

US President Donald Trump stepped up talks about annexing Greenland this month – and has not ruled out taking it by force. On Wednesday, negotiations between the United States, Denmark and Greenland over the future of the world’s largest island ended without a diplomatic breakthrough.

French Finance Minister Roland Lescure told the Financial Times on Friday that economic ties between the United States and Europe could be damaged if Trump decides to seize the autonomous Danish territory.

“Greenland is a sovereign part of a sovereign country that is part of the EU. This should not be disturbed,” he said.

Asked if the EU would impose economic sanctions on the US in the event of an invasion of Greenland, Lescure told the FT: “I’m not going there. I mean, obviously, if that happened, we would certainly be in a totally new world, and we would have to adapt accordingly.”

His comments come as a Democratic-led US delegation is expected to travel to Copenhagen on Friday for talks with Danish lawmakers.

Trump said the United States needed Greenland for national security reasons. Analysts told CNBC it wants to keep rivals out of emerging trade routes and, potentially, mining of minerals critical to sectors like defense.

“Significant” economic pressure in the form of tariffs or sanctions against Denmark by the United States “could likely mean a significant pushback from the EU, where the EU could respond in kind, leading to a sort of trade war with the United States as well as continued risks,” Dan Alamariu, chief geopolitical strategist at Alpine Macro, told CNBC via email.

“It would shake the markets,” he said. “It would also challenge NATO, although we do not expect that to happen, or that NATO would fall apart. Reluctance in domestic politics and markets would likely moderate such moves by the Trump administration.”

Meanwhile, European troops arrived in Greenland on Thursday evening for a collaborative military exercise.

This shows the United States that “this is first and foremost an allied effort,” Maria Martisiute, a policy analyst at the European Policy Center, told CNBC’s “Squawk Box Europe” on Friday. “If we want to strengthen veterans and defense in Greenland or the broader Arctic, that’s not for the United States to decide. It can be done through allied efforts.”

This exercise, combined with European leaders laying out their non-negotiable red lines, can “send a powerful message,” she said, adding: “It remains to be seen how the United States will proceed in this regard.”

The European Commission, the EU’s executive body, has proposed doubling its spending on Greenland in its latest draft budget.

“What is clear is that Greenland can count on us, politically, economically and financially, as well as in terms of security,” European Commission President Ursula von der Leyen said on Thursday.