Big Story: Geopolitics at the Top of the World
Art of the Deal: Polar Edition
Ever since Trump’s re-election, his desire to own Greenland has been at the forefront of the agenda, threatening the freedom heralded by the Greenland’s national anthem. Over the past few weeks, this obsessiveness has only increased even to the point of risking military confrontation between NATO states. This push stems from a mix of legitimate strategic arguments and exaggerated or politically charged rhetoric. The short-term market impact has been visible, and long-term implications, especially if formal agreements were to be signed has the potential to restructure supply chains and geopolitical alignments.
Why does the U.S want Greenland?
Donald Trump has repeatedly framed Greenland as essential for U.S. national security, especially due to its geographical position in the Arctic. Greenland sits between North America and Europe, adjacent to the North Atlantic and Arctic shipping lanes, and above the shortest flight (and ballistic missile) path between the U.S. and Russia. Control of Greenland would enhance the U.S.’s capability to monitor Arctic activities, and support missile defense systems through advanced radar coverage. However, it must be noted that the US already has widespread military access across Greenland, made possible by a Cold War agreement signed in 1951 and amended in 2004. The U.S. already operates Pituffik Space Base (Thule Air Base) in northwest Greenland, which supports missile warning and space tracking systems.
Moreover, as climate change continues to melt the Arctic ice, new shipping corridors are opening up such as the Northwest Passage and Transpolar Sea Route. These could shorten trade routes between Asia and Europe, reducing reliance on chokepoints like the Suez Canal. Greenland’s position is crucial for future supply chain infrastructure and monitoring of these routes.
Greenland also contains significant deposits of rare earth minerals and critical elements, including uranium, graphite, and others essential for high-tech, renewable energy, and defense industries. These are strategically important in global supply chains, especially as the U.S. seek to diversify away from reliance on China’s dominant role in rare earth processing. However, mining remains extremely difficult due to climate, terrain, and infrastructure limitations; existing projects are limited, and long-term commercial viability is uncertain.
Beyond strategic rationale, Trump’s public statements often mix strategic language with personal or political rhetoric, including linking his renewed push to not receiving the Nobel Peace Prize, framing the issue as part of a global security mission, or casting rivals China and Russia as urgent threats.
Are these reasons valid?
It is true that Greenland is strategically important, given Arctic geopolitics and missile routes. The U.S. and NATO already consider Arctic security a priority in managing Russian and Chinese activity.
However, claiming only the U.S. can secure Greenland may be misleading. The existing U.S.-Denmark defense arrangements allow for military presence without transferring sovereignty. Experts argue that expanding cooperation under current alliances would address security needs far more effectively than forcing a transfer of sovereignty.
While Greenland is rich in potential mineral resources, most deposits are untapped and commercially unviable without massive investment. Many deposits are legally constrained, and environmental considerations are strong. The infrastructure costs and harsh operating conditions mean Greenland’s resource wealth may not be a short-term economic windfall.
Pressuring a NATO ally with tariffs to force a territorial sale challenges fundamental principles of international law and sovereignty. This led to widespread diplomatic criticism, even among some European right-wing parties, and increased calls for EU strategic autonomy.
Economic impact of current volatility
Trump’s tariff threats tied to Greenland, including possible 10-25% duties on imports from eight European countries has already pushed markets down. Stock markets dropped sharply in Europe and the U.S. as investors feared a new transatlantic trade conflict, the price of gold, a safe haven asset, set a new record and currencies like the Swiss franc, another safe haven, strengthened as risk aversion increased. The International Monetary Fund warned that such tariff escalations could trigger a “spiral of escalation” hurting global growth and investment decisions.
The threat also contributed to uncertainty in global trade flows and caused the EU to pause a major U.S.-EU trade deal, delaying economic integration. Analysts note that even modest tariffs could have measurable impacts on GDP, potentially reducing growth in affected European economies by 0.1 to 0.5% though the political fallout often outweighs the direct economic effects.
Economic impact IF a Greenland deal goes through
A hypothetical formal transfer of Greenland to U.S. control, which is currently not part of the known framework agreed with NATO and Denmark, would have long-term, far-reaching economic effects.
If the U.S. secured exclusive rights to Greenland’s strategic resources and Arctic infrastructure, it could, strengthen critical mineral supply chains and reduce reliance on foreign sources whilst also enhance U.S. presence in emerging Arctic shipping and logistics. This could support industries such as defense, renewable tech, and advanced manufacturing, but only over decades and with high upfront investment costs.
On the other hand, Greenland’s economy which is currently dominated by fishing and aid from Denmark may be set to experience a major shift in control or investment which in turn could also change the underlying economic structure, but risks include environmental degradation and social disruption as citizens strongly oppose U.S control.
What does this mean for Sri Lanka?
While geographically distant from the Arctic, Sri Lanka may face indirect consequences. Heightened geopolitical tensions and tariff risks can feed into global trade uncertainty. Volatility in shipping and commodity markets can indirectly affect Sri Lanka’s import prices, though the Greenland issue alone is unlikely to be a primary driver.