President Donald Trump wants Greenland, and he's threatening Europe's economy to get it. Goldman Sachs just ran the numbers on what happens if he's serious, and they're not pretty for the continent's already fragile growth outlook.
In a research note published late Sunday, Goldman Sachs economist Giovanni Pierdomenico mapped out the potential damage from Trump's announcement that the U.S. could slap sweeping tariffs on eight European countries unless they start negotiating what he called the "complete and total purchase" of Greenland. On Monday, Trump doubled down, claiming NATO has warned Denmark for two decades to "get the Russian threat away from Greenland" and that Copenhagen has failed to act. "Now it is time, and it will be done," he declared.
The Math On European Pain
Here's the plan Trump laid out: a 10% tariff starting February 1, 2026, on imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland. No deal by June 1? That jumps to 25%.
Goldman Sachs flags that whether any of this actually happens is deeply uncertain. But assuming the initial 10% tariff lands, Pierdomenico estimates it would shave roughly 0.1% to 0.2% off real GDP across the targeted countries, mainly by hammering exports to the U.S.
Germany faces the biggest exposure. Under a broad implementation, German exports subject to the tariff could equal 3% to 3.5% of GDP. Even with a narrower approach, the damage would be substantial. For the euro area overall, Goldman pegs the drag at around 0.1% of GDP, roughly matching the expected hit to the U.K.
"The GDP hit could be larger should there be adverse confidence or financial market effects," Pierdomenico noted, pointing out that these estimates assume no major spillovers beyond the direct trade impact.
When 25% Tariffs Enter The Picture
Things get considerably uglier if Trump follows through on escalating to 25%. In that scenario, Goldman Sachs projects the GDP drag could balloon to 0.25% to 0.5%, layering on top of the roughly 0.4% real GDP hit already attributed to last year's tariff increases.
That timing matters. European growth is already fragile, meaning economies are more exposed to external shocks right now. Piling on another half percentage point of lost output when you're barely growing anyway is not the kind of math policymakers want to see.
The silver lining, if you can call it that: inflation probably won't be a major problem. Despite worries that new tariffs could reignite price pressures, Goldman expects the inflationary impact to be very small, assuming no immediate retaliation from Europe.
Why? Weaker demand from reduced exports would likely cancel out any rise in import prices. Under a simple Taylor-rule framework, Pierdomenico said the tariff shock would actually suggest modestly lower policy rates, all else equal, offering some cushion for domestic demand.
Markets React, Hard
While U.S. markets were closed for Martin Luther King Jr. Day on Monday, European equities sold off sharply as investors absorbed the latest tariff salvo from Trump.
Pan-European benchmarks tumbled across the board, with the EURO STOXX 50 falling 1.4% and the broader STOXX Europe 600 down 1.2%.
The pain was most intense among large, globally exposed companies. LVMH (LVMUY) dropped 4.78%, while ASML Holding N.V. (ASML) fell 3.74%. Hermès International (HESAY) declined 3.33%, and Novo Nordisk A/S (NVO) slipped 2.96%.
These are exactly the kinds of companies that depend on global trade flows and have significant U.S. exposure, making them vulnerable to tariff threats even before anything is officially implemented. The market clearly isn't waiting around to find out whether Trump is bluffing.
