President Donald Trump has once put pressure on his allies in a move that saw him announce 10% tariffs on countries that don’t agree with his push to acquire Greenland. The new tariffs are specifically targeting the Netherlands among seven other nations, stemming from tensions over control of the Arctic.
For investors monitoring European markets, it introduces a fresh layer of volatility, especially following Trump’s past tariffs, which have backtracked into a US – EU deal.
Understanding the “Greenland” tariffs
The context for the new levels of tension between President Trump and the Netherlands isn’t good, nor is the fact that the US is being taken advantage of. The reason is a dispute over the “purchase” of Greenland, which, according to Trump, matters to both national and regional security.
In Trump’s view, the tariffs will start at 10% and take effect on February 1st. If no concessions are made on Greenland, tariffs will rise to 25% starting June 1st.
This escalation follows military exercises in the region involving the targeted nations, which the US administration has framed as a point of contention. While the political reasoning may seem unconventional, the economic reality is stark. These tariffs fall under the International Emergency Economic Powers Act (IEEPA), signaling a shift where trade policy is increasingly used as a lever for geopolitical goals rather than purely economic ones.
The squeeze on Dutch exporters
For the Netherlands, a nation rooted in trade, any additional tariffs could create economic pressure. The Dutch economy is deeply integrated and at times dependent on global supply chains. Additional tariffs could create headwinds for national budgets and introduce uncertainty into national markets.
For reference, a 15-25% price increase on goods makes them less competitive compared to domestic US alternatives. Companies like Philips, which have already adjusted their profit expectations, anticipate losses of €150-200 million due to existing tariffs.
The Netherlands, a trading nation by nature, faces immediate headwinds. As the gateway to Europe, the Dutch economy is deeply integrated into global supply chains, making it particularly vulnerable to protectionist measures.
If tariffs come into play, the broader economic outlook could be concerning. Rabobank suggests that an additional trade war could slow down global economic growth by 2.2%, and for the Netherlands, the baseline scenario could see GDP slow to 1.3%. That is, if a tariff war were to go into effect in 2025. For 2026, the GDP slowdown could result in a 0.6% decrease and economic damage of approximately €7 billion annually.
Potential new markets
If the trans-Atlantic relationships continue to become unreliable, as we’ve already seen the US exert pressure on the EU, the Netherlands could accelerate its strategy to diversify. The goal is to reduce their dependency on the US and strengthen ties with other emerging regions where Dutch production can expand. This could include Southeast Asia, South America, and Africa.
While purchasing power isn’t as strong in these regions, it does give the Netherlands an alternative to avoid economic pressure from the US. As over 54% of Dutch exports currently go to just five partners, changing growth regions does take time.
A critical moment for transatlantic relations
The last round of tariffs pushed the US-EU relationship into fragile territory, and even now, the announced tariffs have elicited a swift, united response from the US. While the Netherlands and other European countries were ready to combat Trump’s tariffs, during the World Economic Forum at Davos, Trump held a speech backtracking on his initial announcement.
As European leaders still see this as a way for Trump to negotiate, the recent escalation prompted the EU to seek greater independence in national and regional security.
With growing uncertainty and threats from across the Atlantic, the EU is weighing whether to activate the “anti-coercion instrument,” a trade tool that allows the EU to impose counter-tariffs and investment limits. For investors, however, the prolonged uncertainty could lead to higher levels of volatility.
Navigating the volatility
The imposition of these tariffs serves as a stark reminder that geopolitical risk is a central component of modern investment strategy. As the EU formed a common response to the US threats, which eventually evaporated during the WEF this week, the EU could be looking for new strategic partners in other regions of the globe.Why start planning in winter or spring
