President Trump’s Greenland “agreement framework” and tariff reversal are confusing

Markets and some European leaders welcomed the news that U.S. President Donald Trump declined to impose additional tariffs on European countries, but others were confused.

President Trump told CNBC on Wednesday that he and NATO Secretary-General Mark Rutte have “the idea of ​​a deal”, shortly after declaring on Truth Social that he would not proceed with the tax he had threatened to impose on eight European countries starting February 1.

Markets rose on Thursday on the news, but questions remain about the content of the purported Greenland deal.

Because the president did not reveal the details of the framework or who agreed to it, one strategist told CNBC, “No one will believe his word anymore.”

President Trump outlined the Greenland deal in broad terms, calling it the “ultimate long-term agreement” that would ensure U.S. national security and provide access to “minerals.”

Greenland’s location is important for military posture in the Arctic, but climate change is making it easier to access and sparking renewed interest in its rare earth and other important mineral reserves.

However, President Trump did not say whether Denmark or Greenland, which is responsible for defending the island, had any agreements in place.

NATO Secretary General Mark Rutte told Fox News that the issue of ownership of Greenland did not come up in his talks with President Trump about Arctic security amid heightened activity by China and Russia.

Ed Price, a senior adjunct fellow at New York University, told CNBC on Thursday that striking a deal “requires two people to tango,” and described Trump’s Davos meeting as “a monologue, not a dialogue.”

Mr Price also said the framework was “the beginning of the process, not the end”, warning that the precedent of negotiations over disputed territory could tempt future attempts in other regions.

Meanwhile, Chinese state media on Wednesday called on the EU to reconsider its security dependence on the United States and pursue greater “strategic autonomy.”

Mr. Price added that Mr. Trump was doing China an “advantage” in the long run by suggesting that U.S. commitments could fluctuate widely due to political motivations.

Robin Brooks, a senior fellow at the Brookings Institution, said President Trump’s toned-down remarks had “nothing to do with Europe” and were likely prompted by concerns about the recent spike in global bond yields, which have been precipitated by fears of a new trade war.

Brooks also said European countries have limited influence in negotiations with Trump.

“European countries are apparently free riding on the US security umbrella. They need to spend more, and they will,” Brooks said, warning that most countries except Germany do not have the fiscal space. “Many of these countries just don’t have the financial firepower,” he told CNBC’s “Squawk Box Asia.”

In a speech at Davos on Wednesday, President Trump acknowledged financial markets’ discomfort with threats against Greenland, as he publicly ruled out for the first time the possibility of occupying the island by force.

Whatever ultimately happens with tariffs, European leaders need to plan for the worst-case outcome, said David Roche, a veteran investor at Quantum Strategy.

Mr. Roche said President Trump’s threat to Greenland was “the biggest ‘taco’ you can get,” referring to the “Trump always plans” phrase that has come to define a market strategy that anticipates the president will counter-threat.

But Roche said this is becoming a problem. The greater President Trump’s threat, the more allies will expect him to “march the troops up the hill and then march down the hill.”

“What the European Union has learned is that if we stand up to them, we will win,” Roche said. “No one will believe him anymore.”