At the roundtable of the Davos Forum, EU leaders condemned the tariff threats as wrong actions, while a report from JPMorgan reassured the market, stating that this is merely "the art of negotiation" and that an agreement will ultimately be reached.
"When friends shake hands, it must mean some kind of commitment," the President of the European Commission publicly stated at the Davos World Economic Forum, emphasizing that the trade agreement reached with the United States last July must not be undermined.
Her remarks directly targeted the Trump administration's threats to impose tariffs on European countries opposing the U.S. acquisition of Greenland, marking the escalation of the dispute over the Arctic island from market concerns to open diplomatic and political confrontations.
I. Confrontation at the Davos Forum
● The atmosphere at the 2026 Davos Forum is unusual. Against the backdrop of increasing fragmentation in global geopolitics, nearly 3,000 representatives gathered here, including about 65 heads of state and government leaders.
● The U.S. delegation led by Trump exceeds 300 people, dubbed by the media as "the largest delegation in history." He is scheduled to deliver a speech on January 21, likely focusing on potential candidates for the Federal Reserve Chair and affordability issues.
● The dispute over Greenland has become the focal point of the forum. A European diplomat revealed that after Trump announced additional tariffs on eight European countries last Saturday, "the Greenland issue was also added to the previously scheduled meeting agenda."
II. Intense Reactions from All Sides
● European Commission President Ursula von der Leyen made it clear in Davos: "Denmark's sovereignty and territorial integrity are non-negotiable." She emphasized that the EU is formulating its own security strategy, with an upgraded Arctic strategy, where the core principle is that sovereign nations have the right to determine their own future.
● EU High Representative for Foreign Affairs and Security Policy Josep Borrell reiterated in the European Parliament: "Sovereignty should not be used for trade; no country has the right to take over another country's territory."
● French President Macron called on the international community to uphold sovereign equality and multilateral cooperation, opposing the logic of determining everything by force. Canadian Prime Minister Trudeau stated that Canada "stands firmly with Greenland and Denmark."
● Belgian Prime Minister De Wever's remarks were particularly sharp: "We relied on the U.S., so we have been tolerant towards them in the past, but now the U.S. has crossed too many red lines." He pointed out that the choices facing Europe concern dignity: "Being a happy vassal is one thing; becoming a miserable slave is entirely different."
III. JPMorgan's Optimistic Forecast
● In contrast to the tense atmosphere in the political sphere, JPMorgan's international market intelligence team holds a cautiously optimistic view of the situation. The bank believes that the current chaotic situation will ultimately de-escalate, transforming into "an arrangement reached through negotiation" rather than a full-blown crisis.
● JPMorgan analyst Federico Manicardi pointed out that the hardline stance displayed by the U.S. should be seen as "the art of negotiation," aimed at triggering talks and creating leverage and urgency.
● Although the EU responded by stating it would consider retaliatory tariffs and use counter-coercion tools, this is more of a strategic posture. The bank expects that a solution may emerge during the Davos Forum, with the final outcome being an expansion of U.S. security and economic presence in Greenland, while Denmark retains sovereignty.
IV. Excluding Extreme Scenarios
Regarding extreme market concerns, JPMorgan analyzed and ruled out two highly unlikely scenarios:
● The main reason is that the U.S. does not need to gain formal territorial control to achieve its core strategic goals in the Arctic regarding security, defense alerts, and resource acquisition. Additionally, any proposal involving territorial changes would require dual approval from both the Danish and Greenlandic local governments, which is politically and legally very challenging.
● As for the possibility of a U.S. military "invasion" of Greenland, JPMorgan views it as a very low-probability tail risk. Such an action is considered extremely unpopular among voters and, more importantly, could lead to the rapid disintegration of NATO, a crucial military alliance, with severe and uncontrollable geopolitical consequences.
● Therefore, analyst Federico Manicardi pointed out that the most likely outcome is not any of the extreme scenarios mentioned above, but rather an arrangement reached through negotiation. This arrangement will expand U.S. security and economic presence in Greenland while allowing Denmark to retain sovereignty, thus meeting the U.S. goals of strengthening its Arctic posture and acquiring resources.
V. Risks of Geoeconomic Confrontation
● The "2026 Global Risks Report" released at the Davos Forum indicates that "geoeconomic confrontation" has become the primary risk for 2026. World Economic Forum Executive Director Saadia Zahidi described it as a situation where "economic policy tools essentially turn into weapons rather than a basis for cooperation."
● International Monetary Fund President Kristalina Georgieva stated in Davos: "It is too early to assess the economic impact of the Greenland dispute, but it could become a drag on economic growth."
● She pointed out that various simulations show that deviating from keeping trade broadly on track could suppress economic growth. Her conclusion is: "The best solution is to find a way to reach an agreement that benefits everyone around the world."
VI. Challenges to Federal Reserve Independence
● Aside from the Greenland dispute, the independence of the Federal Reserve is facing severe challenges. The U.S. Supreme Court is scheduled to hear oral arguments on January 21 regarding Trump's attempt to dismiss Federal Reserve Board member Lisa Cook.
● This case has been referred to by some observers as the "trial of the century," potentially setting the first "operating guidelines" for how a president can remove personnel from this highly protected central bank institution.
● Federal Reserve Chair Jerome Powell plans to attend the hearing, a decision criticized by Treasury Secretary Yellen. Yellen stated in Davos: "If you don't want to politicize the Federal Reserve, the Fed Chair shouldn't be sitting there trying to influence the outcome."
The theme of this year's annual meeting on the World Economic Forum's official website is "The Spirit of Dialogue." When the President of the European Commission publicly called Trump's tariff threats "a mistake," IMF President Georgieva's warning echoed in the halls of Davos: "This could become a drag on economic growth."
Meanwhile, outside the forum, JPMorgan's trading desk has been long on UK rates and short on U.S. rates since last September, seemingly a calm bet on the eventual finding of a solution.
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