MW Here's how Trump could impose tariffs on Denmark in a bid to control Greenland
By Chris Matthews
The president-elect could rely on powers related to national security
President-elect Donald Trump threatened Tuesday to place new tariffs on imports from Denmark unless the country gives up control of Greenland, news that dented the stocks of some of Denmark's most important companies and underscored Trump's focus on geopolitical competition.
Trump said that U.S. control of Greenland was needed for national and economic security and that he wouldn't rule out the use of military force to take the world's largest island, which is a Danish territory.
"When I think of these territorial aspirations, I see a China thread through all of them," Steve Pavlick, a former Trump Treasury official who is now a policy analyst at Mindset, told MarketWatch. "Greenland also has a lot of natural resources and critical mineral wealth" that could be useful in any future conflict with China, he added.
Trump also said that he wants to take control of the Panama Canal, which was built by the U.S. more than a century ago.
Greenland has a strategically important location between North America, Europe and the Arctic Ocean, along important North Atlantic sea routes used for trade.
It is also home to Thule Air Base, a U.S. base equipped with early warning systems for missile defense, particularly against threats from Russia and China.
Pavlick said that the president-elect is concerned about China's growing portfolio of foreign ports and its use of its merchant fleet as a surveillance tool, as well as Russia's militarization of its own Arctic territories.
Benjamin Cote, a partner in the international trade practice at law firm Pillsbury, told MarketWatch that this line of thinking could generate national-security rationales for raising tariffs on Denmark in order to force it to transfer control of Greenland to the U.S.
"The incoming President could potentially rely on the 1977 International Emergency Economic Powers Act (IEEPA), which gives him broad authority to declare a national emergency to deal with unusual and extraordinary threats to national security, foreign policy or economy of the United States," Cote told MarketWatch in an email.
"The President would stand to have wide discretion to determine what a national emergency is and potentially (immediately) to impose tariffs, although we would still anticipate legal challenges if IEEPA were used against a U.S. ally like Denmark," he added.
Other possible legal tools include what are known as Section 301 and 232 powers, which were used during Trump's first term to threaten as well as implement tariffs on allies and rivals alike, though "these laws involve more significant substantive and procedural requirements and would prove slower to implement," Cote said.
Danish stocks have been under pressure since Trump's remarks, with the iShares MSCI Denmark exchange-traded fund EDEN falling 1.2% on Tuesday and another 0.6% on Wednesday, according to FactSet.
The ETF tracks the largest publicly traded Danish companies, including pharmaceutical giant Novo Nordisk (DK:NOVO.B) $(NVO)$, transport and logistics company DSV (DK:DSV) and Pandora $(PANDY)$ (DK:PNDORA), the world's largest jeweler.
Other major Danish public companies include Danske Bank (DK:DANSKE), medical-device manufacturer Coloplast (DK:COLO.B) $(CLPBY)$, wind-turbine manufacturer Vestas Wind Systems (DK:VWS) $(VWDRY)$ and biotechnology company Novozymes $(NVZMY)$. The country is also home to the privately held Lego Group, which brought in nearly $10 billion in revenue in 2023.
Danish imports to the U.S. are dominated by pharmaceutical products, including Novo Nordisk's Ozempic, and medical devices such as hearing aids and insulin.
In fact, the U.S. gets more than 75% of all its imports of insulin from Denmark, according to an analysis by Jason Miller, a professor of supply-chain management at Michigan State University's Eli Broad College of Business.
"I don't think the American people are in a mood to incur higher costs for pharmaceuticals and hearing aids," he wrote Tuesday on LinkedIn. "Given how much of an issue that inflation was during the last election, anything that would increase inflation doesn't seem like a wise policy at the moment."
One way for Danish companies to avoid any new tariffs would be to invest in production facilities in the U.S., which Novo Nordisk has already begun to do. The company announced in June that it would invest $4 billion to fund a new manufacturing plant in North Carolina, with production expected to come online by the end of the decade.
Greenland Prime Minister Mute Egede supports the goal of independence for the territory once its economy is able to sustain itself without subsidies from the Danish government, and Danish Foreign Minister Lars Lokke Rasmussen noted that goal in statements to the press Wednesday.
"We fully recognize that Greenland has its own ambitions. If they materialize, Greenland will become independent, though hardly with an ambition to become a federal state in the United States," he said at a press conference, according to Reuters.
Pavlick, the former Treasury official, said that the president-elect's statements should remind investors that Trump will disregard norms and niceties if doing so gives him more leverage in whatever negotiation he may find himself in.
"Big picture, this is a reminder that with Trump you're going to have a lot of uncertainty and headline risk," he said. "You're not going to be bored."
-Chris Matthews
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January 08, 2025 16:08 ET (21:08 GMT)
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