It was another TACO moment at Davos -- Trump-Again-Chickened-Out. After bringing the transatlantic alliance with Europe to the brink over threats to take Greenland “the easy way, or the hard way”, US President Donald Trump on Wednesday backed down.
“People thought I would use force. I don’t have to use force. I don’t want to use force. I won’t use force,” Trump said addressing a packed house at the World Economic Forum. For form, to show he had not let go, the President said he now has a deal for “unrestricted access to Greenland”.
He also backed off from his threat to impose a 10% tariff from 1 February on eight, European allies including France and Germany, for opposing his Greenland takeover. The markets read it right. The Dow Jones lifted 589 points, or 1.12% after his Davos speech. Plummeting markets across the world also shot up.
The respected, US-based news outlet, ‘Politico’, has documented Trump has made big announcements in the last 3 months to raise levies at least 5 times which have been then withdrawn. These include aborted higher levies on Canada for playing an anti-tariff ad, and on French wine and champagne.
Greenland, the trigger
But beyond all the idiosyncrasies of Trump, what we are seeing today is the tectonic shift in the global balance of power. What were firm allies of the US -- Europe, Canada, and even Australia, are today standing up to the the US and refusing to be humiliated and run over.
The ‘Middle Powers’, as Canada’s PM Mark Carney described them, are willing to take on both Russia and China, on one hand, and the U.S. on the other. For Europe’s new found unity and strength,they have to thank Trump.
What these countries are saying is: US ‘imperialism’ being unleashed on common enemies -- Iran or Venezuela -- is one thing. But threatening allies with annexing their assets and sovereignty (Greenland is a self-governing province of Denmark), or arm-twisting them with the threat of economic sanctions and tariffs, is a new low.
Greenland was the tipping point and Davos is where it all came out in the open. Canadian premier Mark Carney was blunt. He said it was the “end of rule-based international order”, and “we are in the midst of a rupture, not a transition.”
Carney, who emerged as the darling of Davos’ anti-Trump camp, said “more recently, great powers have begun using economic integration as weapons. Tariffs as leverage, financial infrastructure as coercion. Supply chains as vulnerabilities to be exploited.”
In this scenario, if the ‘Middle Powers’ don’t band together against the ‘hegemon’, their subordination will be permanent. “Middle powers must act together because if we're not at the table, we're on the menu,” was Carney’s war cry.
Sporting aviator sun shades, French President Emmanuel Macron defended Europe’s support for Denmark’s sovereignty and denounced the “endless accumulation” of new tariffs as fundamentally unacceptable, “even more so when they are used as leverage against territorial sovereignty”. He called for Europe to strengthen its trade defence instrument while at the same time sought investment, including from China.
Trade counter attack
To a possible escalation of more tariffs, Europe is now mulling retaliation through what is called the ‘trade bazooka’. It is a raft of anti-coercion instruments that block or restrict investment from countries, in this case the U.S., which is seen as putting undue pressure on EU member nations or corporations.
The European Union is a 450-milion consumer market. US-Europe trade is whopping $1.7 trillion a year. Take this away and US companies and its economy will be in trouble.
Europe has also realized it had slept over its own security, comfortable in the belief that NATO, a euphemism for US cover, would look after any hostile Big Power incursion. Article 5 of NATO’s charter guarantees the intervention by members of the bloc in case a member faces military attack.
But this security dome is in tatters now with the US threatening the sovereignty of member-country Denmark. The story began earlier with Donald Trump’s tepid support for Ukraine and his willingness to sleep with the enemy, Russia. It has come to a point where Ukraine’s armament list is now being supplied by the U.S., but the European nations are funding the purchases.
Months ago, Friedrich Merz, the new German chancellor, called out Trump as an ‘unreliable ally’ and appealed to his NATO allies to ramp up investments in armaments and build their own defense forces. The warning has been taken seriously and the Europe’s armament industry is now in full swing. Germany has also promoted a 500-billion-Euro fund to develop Europe as an independent energy and infrastructure hub.
The rupture between the US and its European allies seems almost complete with France’s Emmanuel Macron and other leaders turning down membership of the ‘Board of Peace’ -- being posed as an alternative to the UN under Trump’s leadership.
The United States as a super power is redefining international rules with raw power aimed at complete control of the western hemisphere and beyond. On the other hand, its long time allies, Canada, England and the the European powers, are seriously considering breaking away to build rival, regional blocs to keep the he Trump regime at bay.
It is a crucial moment for India too. The Modi government has unfortunately once again taken an ambivalent foreign policy position of these cataclysmic developments. To the invitation to join the Trump’s Board of Peace, the government is saying it will “wait and watch”.
Meanwhile, Europe is pressing forward with alternative trade deals with countries like India which will help it cut its umbilical cord with the US market. European Union President Ursula von der Leyen said at Davos that EU was close to concluding a free trade agreement with India.
“We are on the cusp of a historic trade agreement…some call it the mother of all deals, one that would create a market of 2 billion people accounting for almost a quarter of global GDP,” she said.
Von der Leyen is expected to visit India early next week. India should not miss this opportunity to build pacts with these new, aggressive ‘Middle Powers”. It could be the secret route to beating Bully US.