What has happened?
The US President announced a 10% tariff on goods from the UK, Denmark, Norway, Sweden, France, Germany, the Netherlands, and Finland would come into force on 1 February. This amount could later rise to 25% on 1 June unless ‘a deal is reached’ for the US to acquire Greenland.
The eight countries have been steadfast in their opposition of the President’s proposal and support for Greenland’s territorial integrity and sovereignty.
What are the economic implications of the tariffs?
The economic impact of the announced tariffs is unclear at this stage, not least due to the high degree of uncertainty around whether they will be implemented as announced (or indeed, at all) but also their feasibility – the US Supreme Court has yet to rule on the legality of the ‘Liberation Day’ tariffs announced in April 2025. Notwithstanding this, early estimates suggest only a modest economic impact: analysis from Goldman Sachs points to a 0.1-0.2% reduction in GDP among affected European countries, with the impact on the UK towards the lower end of this range.
However, the hit could be larger if EU countries retaliate with their own tariffs (see below); uncertainty spikes higher (impacting investment and spending plans); we see a disproportionate rise in inflation; or financial market volatility ramps up. Sectors which comprise a large chunk of UK exports to the US may also see a bigger impact: such as medical products & pharmaceuticals, car and metal manufacturers and mechanical power generators.
Financial markets’ reactions so far have been contained, possibly reflecting skepticism over the actual implementation of the tariffs. However, the moves have been directionally telling: the prices of gold and precious metals (seen as a safe haven during times of economic and geopolitical volatility) has risen, building on the increase seen after the investigation into US Fed Chair Jay Powell. Both European stock markets and the US dollar have also fallen.
How might the EU be affected?
Whilst the President’s announcement has targeted a limited number of EU Member States, the EU has acted in solidarity with the Kingdom of Denmark and the people of Greenland. For its part, the European Parliament has decided to freeze the ratification process of last year’s EU-US trade deal, preventing the EU from moving forward in implementing certain commitments it had agreed to undertake as part of the deal. That said, the 15% tariff on EU imports remains in place.
Whilst the EU continues to take a step-by-step approach with a meeting planned between EU Leaders and President Trump in Davos on Wednesday and a further EU Leaders summit on Thursday, they are preparing potential action if the President’s words turn into action. Amongst the current measures being discussed are the deployment of the €93 billion worth of reactionary tariffs, using the draft list following last year’s ‘Liberation Day’ escalation, as well as the activation of the EU’s Anti-Coercion Instrument (known as the EU’s trade bazooka ).
What is the UK Government doing?
In a press conference on 19 January, the Prime Minister reaffirmed the UK’s strong relationship with the US – citing significant investment, cooperation on defence, and economic growth. The Prime Minister emphasised the UK’s support for both the sovereignty of Greenland and for NATO.
The UK Government’s message is clear: trade wars are in nobody’s interests and using tariffs against allies is wrong. The government intends to continue taking a measured approach to US announcements and ramping up diplomatic engagement to understand what President Trump’s announcement means.
What is the CBI’s reaction?
“The UK business community stands in full solidarity with Denmark and the people of Greenland. Respecting territorial integrity and sovereignty are fundamental to uphold international law. They are essential pillars in providing stability and predictability for our companies and our economies.
The UK-US economy is important in generating mutual benefits for companies and citizens on both sides of the Atlantic. Additional tariffs will benefit no one and could seriously undermine the relationship. We support the UK Government's efforts to reach an acceptable solution through dialogue.”
What is the CBI doing now?
The CBI has been in touch with the government at all levels – from ministerial to working – to offer its support for a cool, calm and measured approach.
We continue to share insights with government and are keen to hear how your organisation is impacted by US trade policy decisions and the steps you are taking to mitigate any direct or indirect impacts. We also will feed in member insights to and closely follow updates from BusinessEurope, our European body.
Please do get in touch with Erin Henwood to discuss your views.