As European companies became accustomed to the hard-won U.S. tariff agreements last year, Donald Trump put them right back in his sights with an "explosive" threat to levy levies against nations who oppose his plan to takeover Greenland.

Trump said on Saturday that he will impose a?rising?tariff on imports of goods from EU member countries Denmark, Sweden France, Germany, The Netherlands, Finland, Britain, and Norway from 1 February, unless the U.S. can buy Greenland. This step was condemned by major EU states as 'blackmail.

EU diplomats reported that on Sunday, ambassadors from the European Union reached a broad agreement in order to intensify their efforts to discourage Trump from imposing these tariffs. They are also preparing a package retaliatory actions should Trump decide to proceed with his plans.

The move sent shockwaves throughout the industry, and fears were raised that the trade war of last year would return. This volatility was only reduced by the tariff agreements reached at the middle of the year.

This latest flashpoint has heightened fears over a possible unraveling of NATO alliances, and the disruption to last year's agreements with several European countries," said Tony Sycamore. He is a market analyst at?IG based out of Sydney.

A STAND-OFF MAY RESTORE THE TRADE WAR OF LAST YEAR

In a Truth Social post, Trump stated that additional import tariffs of 10% would be implemented on goods coming from the European nations listed. All these countries were already subject to tariffs between 10% and 15 % imposed last year by the U.S. President.

The bloc, which is expected to have a $1.5 trillion goods and services trade deficit with the U.S. by 2024, looks ready to fight back. Europe is home to major automobile manufacturers in Germany, pharmaceutical companies in Denmark and Ireland and consumer and luxury goods companies from Italy to France.

On Thursday, EU leaders will discuss their options during an emergency summit held in Brussels. This includes a package of tariffs worth 93 billion euros ($107.7billion) on U.S. imported goods that could be implemented on February 6, after a six month pause.

The "Anti-Coercion Instrument", which has never been used, could restrict access to public procurements, banking activities, or investments, or limit trade in services in which the U.S. enjoys a surplus.

Analysts argued that the key question is how Europe will respond - whether it's with more "classic", tit-fortat tariff retaliation or even a tougher approach.

Carsten Nickel said that the most likely outcome is the return of the trade war, which was put on hold by the high-level U.S. deals with the UK and EU last summer.

Companies will look to trade with 'less problematic nations'

Oliver Burkhard, CEO of German submarine manufacturer TKMS, said that the Greenland menace was probably the kick Europe needed to tighten up its approach and concentrate on developing its joint programmes in order to be more independently from the U.S.

He said that it was probably necessary to be given a slap on the face to make us realise we might have to dress differently in the future.

Susannah Streeter is the chief investment strategist for Wealth Club. She said that this new threat added "another layer" to the complexity of dealing with a "chaotic" U.S. marketplace. She added that firms had limited?capacity' to absorb new tariffs.

Christophe Aufrere is the director general of French automobile association PFA.

A French official representing the largest companies in the country said that the Greenland issue is turning tariffs into "a tool for political pressure" and urged the region to reduce their dependency on the U.S.

Neil Shearing is the group chief economist of Capital Economics. He pointed out that certain EU countries, such as Spain, Italy, and others, were not included on the list. This would lead to a "re-routing", or a re-routing, of trade in the EU Free Trade bloc, so the taxes could be avoided.

Analysts said that if new tariffs were imposed, they would hurt Trump. The tariffs would increase U.S. exports and push up prices in the U.S.

"This is a geopolitical headache for Europe and a moderately important economic problem." It could backfire on Trump, said Holger Schmieding. He is the chief economist of Berenberg in London.

"Logic still points towards an outcome that respects Greenland’s right to self determination, strengthens the security of the Arctic for NATO, and avoids a large amount of economic damage to Europe and the U.S."

(source: Reuters)