Trump Backs Down On Tariffs After Greenland Deal Framework

On January 21, 2026, global financial markets were thrown into a whirlwind as President Donald Trump took to the stage at the World Economic Forum in Davos, Switzerland, and then to his social media platform, to announce a dramatic reversal on his threatened tariffs against European allies. The catalyst for this about-face? A hastily arranged, reportedly “very productive” meeting with NATO Secretary General Mark Rutte that resulted in what Trump described as the “framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region.”

The reverberations were immediate. According to The New York Times and The Independent, all major U.S. stock indices surged: the S&P 500 jumped 1.52%, the Dow Jones climbed 1.5%, and the Nasdaq soared by 1.7%. This sharp rally followed a bruising period for markets, which had recoiled at the prospect of a tit-for-tat trade war that threatened to escalate across the Atlantic after Trump’s earlier threats to slap 10% tariffs on goods from several European nations, including Denmark, Finland, France, Germany, the Netherlands, Sweden, Norway, and Britain—tariffs that were set to rise to 25% by June if the U.S. was not allowed to purchase Greenland from Denmark.

Trump’s announcement, posted on Truth Social, was unequivocal in tone if light on details: “Based upon a very productive meeting that I have had with the secretary general of Nato, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region. This solution, if consummated, will be a great one for the United States of America, and all Nato Nations. Based upon this understanding, I will not be imposing the tariffs that were scheduled to go into effect on 1 February.”

For European leaders, the apparent de-escalation was welcome, though it did little to dispel the diplomatic fog. In the days leading up to Davos, European officials had been weighing how best to respond to what one analyst called a “trade bazooka.” The threat of U.S. tariffs, coupled with Trump’s open ambition to acquire Greenland—a Danish territory—had stoked fears of a full-blown crisis within NATO, an alliance already strained by divergent interests and, as Trump put it in Davos, an “unrecognisable” Europe.

Inside Greenland itself, Trump’s rhetoric was anything but abstract. Paarnannguaq Tiitussen, a jewelry store owner in Nuuk, told The Independent, “We are very worried, it’s scary. We don’t sleep well.” She went on to describe Trump’s approach as “nasty” and said, “He’s threatening us indirectly. It’s still a threat.” Greenlanders, she explained, understood the importance of relations with the United States but insisted the territory should have independence and decision-making power. “We are not happy with the colonisation of Greenland. I hope it’s empty threats from Trump’s side.”

Trump’s speech in Davos did little to clarify matters. He repeatedly referred to Greenland as a “big piece of ice” and, at times, confused it with Iceland. He reasserted the need for the U.S. to “take ownership of Greenland to ensure national security,” a stance that left many observers—both in Europe and the U.S.—scratching their heads. As The New York Times pointed out, Trump’s historical claims were misleading. The U.S. military’s presence in Greenland is based on World War II-era agreements that specifically recognized Danish sovereignty over the island; at no point did the U.S. ever possess sovereignty over Greenland.

“After the war, we gave Greenland back to Denmark. How stupid were we to do that? But we did it. But we gave it back,” Trump said in his speech. But, as historian Steven Press of Stanford University explained, the U.S. never had legal sovereignty to give back. “Beyond sheer might-makes-right power politics, the U.S.A. had no authority to ‘keep’ or claim sovereignty over Greenland.”

Trump also took aim at NATO’s finances, claiming, “Until I came along, NATO was only supposed to pay 2 percent of G.D.P., but they weren’t paying them. Most of the countries weren’t paying anything. The United States was paying for virtually 100 percent of NATO. And I got that stopped. I said, ‘That’s not fair.’ But then, more importantly, I got NATO to pay 5 percent, and now they were paying.” The facts tell a more nuanced story. While U.S. pressure did lead to increased defense spending among NATO members, the U.S. share of NATO’s central budget dropped from about 22 percent to 15 percent between 2019 and 2025, and the 5 percent target remains aspirational, not actual. As of the end of 2025, no NATO country had met the 5 percent goal.

In the midst of this geopolitical drama, gold prices soared to a record high—over $4,800 per ounce, according to Reuters—as investors sought safe haven amid the uncertainty. Major stocks, including Amazon, Tesla, and Nvidia, tumbled the previous day, wiping billions off their market values. Kyle Rodda, a senior market analyst at Capital.com, told Reuters, “It’s the loss of trust in the U.S. caused by Trump’s moves over the weekend to tariff European countries and increase coercion in trying to take Greenland. (The move in gold) reflects fears about global geopolitical (tensions).”

Back in Europe, leaders were quick to respond. UK Prime Minister Keir Starmer, in his most forceful remarks yet, declared during Prime Minister’s Questions that he “will not yield” to Trump over Greenland, pledging to “always put national interest over the juvenile politics” of recent days. Mark Rutte, for his part, declined to comment directly on Trump’s Greenland threats but reminded his audience that “the focus on Ukraine should be the number one priority, it is crucial for European and U.S. security.”

Greenland’s government, meanwhile, struck a note of caution. On the same day as Trump’s speech, it issued a brochure advising households to be self-sufficient for five days in case of crisis—a move officially attributed to recent power outages, but one that many interpreted as a prudent step in light of the geopolitical storm swirling around the island. “The publication of the brochure with practical and simple advice for households is not an expression that we expect a crisis,” said Peter Borg, Greenland’s minister for self-sufficiency. “The goal is to strengthen the security of the population and to ensure that society’s overall preparedness is even stronger.”

Amid the spectacle in Davos, Trump also found time to mock French President Emmanuel Macron’s aviator sunglasses and to swipe at Canadian Prime Minister Mark Carney, underscoring the often-personal nature of his diplomacy. The diplomatic fallout from Trump’s Greenland gambit, however, was anything but trivial. As European Parliament members suspended work on a trade agreement with the U.S., and as world leaders pondered their next move, the fate of Greenland—and the stability of the transatlantic alliance—hung in the balance.

As the dust settles, one thing is clear: the intersection of geopolitics, economics, and raw presidential ambition can send shockwaves through global markets and alliances alike, leaving both investors and ordinary citizens to wonder what the next chapter will bring.