The Greenland saga rumbles on with a glimmer of hope that US President Donald Trump could be set to climb down from his latest European tariff threats. In the meantime, French President Emmanuel Macron could incur a 200% tariff on his country’s wine after he refused an offer from Trump.
Elsewhere, UK business and trade secretary Peter Kyle has set out his views on a UK-EU customs union.
US-EU tensions
Trump has confirmed he will be holding a meeting on Greenland at this week’s World Economic Forum at Davos.
Following a “very good” telephone call with NATO secretary-general Mark Rutte, he said he would be speaking to “various parties” in Switzerland.
It’s not clear which, if any, of the eight European nations Trump has threatened with fresh tariffs will be among those with whom he speaks.
Over the weekend, Trump said we would introduce an additional 10% rate on imported goods from the UK, Germany, France, the Netherlands, Norway, Sweden, Finland and Denmark if they continue to obstruct his plan to take control of Greenland.
Yesterday (19 January), the UK was singled out for its decision to hand over the Chagos islands to Mauritius, with Trump describing this as “another in a very long line of National Security reasons why Greenland has to be acquired” and an “act of GREAT STUPIDITY”. The islands are home to a UK military base used by the US.
US treasury secretary Scott Bessent was dismissive of Europe’s ability to coordinate a response to the threat, telling reporters the continent would probably create “the dreaded European working group”, rather than retaliate quickly, on the sidelines of Davos.
The EU has since returned to the €93bn list of US products earmarked for tariffs last year, with a number of senior leaders advocating for the use of its Anti-Coercion Instrument, which has never been used before.
For in-depth analysis of unfolding events surrounding the Arctic island and US-EU relations, members can read today’s Trade Insights.
French wine threats
In the latest politicisation of tariffs, Trump has also threatened 200% tariffs on French wine after president Emmanuel Macron refused to accept a seat on the Gaza Board of Peace.
Macron raised concerns about the extent of the board’s powers, which is set to administer the strip following the ceasefire with Israel. A statement from his office said its charter “goes beyond the framework of Gaza and raises serious questions, in particular with respect to the principles and structure of the United Nations”.
In addition to the controversy surrounding the board itself, appointees so far include Russian president Vladimir Putin and former British prime minister Tony Blair.
When told of Macron’s refusal to join by a reporter yesterday, Trump responded:
“I'll put a 200 percent tariff on his wines and Champagnes, and he'll join, but he doesn't have to join”.
Kyle dismisses customs union
Business and trade secretary Peter Kyle told the FT it would be “foolish” of the UK to attempt to form a customs union with the EU.
While admitting that the challenge of securing economic growth provokes “anxiety”, he said that it was important not to rely on easy answers.
“I think at the moment it would be foolish to slip towards what would be simple solutions.”
He noted that it took 20 years for Turkey to negotiate its customs union with the EU, the arrangement which was cited by justice secretary David Lammy last month. Since then, a wave of senior political figures have espoused the benefits of a bespoke union.
The Labour government drew a red line over rejoining the customs union in its 2024 election manifesto, and Starmer has resolutely stuck to this in his comments on the matter since entering office.
The full interview is available here.
Chinese EV opportunities
German auto manufacturers have welcomed the return of a government electric vehicle (EV) subsidy programme previously ended in 2023. The programme is set to be reinstated following a reduction in sales throughout 2024 and 2025.
Notably, unlike a similar scheme offered in the UK, Germany won’t be excluding Chinese vehicles. The glut of electric vehicles exported by Chinese firms has prompted protectionist measures around the world, with the EU introducing tariffs on leading manufacturers like BYD and SAIC in 2024.
Slated to run until 2029, the scheme will provide €3bn of support provided for mostly low- and middle-earning consumers to purchase EVs, and should enable the purchase or lease of up to 800,000 vehicles.
Germany car industry association VDA pressed for the measures to be introduced as soon as possible, anticipating they could boost sales by 17% year-on-year. No complaints were raised about the inclusion of Chinese manufacturers. Instead, the association called on the German government to ensure greater provision of critical infrastructure like charging ports.
Leading Chinese manufacturer BYD's market share lagged significantly behind German manufacturers like Volkswagen, Audi, Mercedes-Benz and BMW last year.
Comparatively, a lack of tariffs has helped BYD gain a greater share of the UK's market.
The FT reports that a number of second-tier Chinese auto-manufacturers, like Nio, Aion and Zeekr, will begin selling models to UK consumers in the coming months, seeking similar success.
Elsewhere in the headlines
· Another update that could sour UK-US relations: the UK has approved plans for a new Chinese embassy. Set to be the largest in Europe, the £255m site is situated near fibre optic cables carrying information to and from the City’s financial hub, raising security concerns
· China’s export-led economic model propelled it to its 5% growth target in 2025, although experts have questioned the veracity of these figures in light of its ailing property market and weak domestic demand
· Another record-breaking week for gold and silver following the latest Trump tariff threats
Yesterday in trade
· A lookahead to Davos amid US-EU tensions
· Warnings that the US is seeking concessions on UK standards within ongoing trade discussions, including for food
· The IMF published its 2026 World Economic Outlook
