There are good reasons for Washington to care about Greenland, including the island’s strategic position and untapped reserves of rare-earth minerals. Mr. Trump isn’t the first President to suggest buying it outright, but the U.S. already has a high degree of access to the island and Denmark is willing to negotiate more. Tariffs in the cause of bullying imperialism is the wrong way to make a deal, and they might stiffen opposition on the island and in Europe.
Mr. Trump is taking reckless risk with the NATO alliance that advances U.S. interests in the arctic. If he doesn’t believe us, he can look up Norway, Sweden and Finland in an atlas. The latter two joined the North Atlantic Treaty Organization recently, and already are discovering that with Mr. Trump no good strategic deed goes unpunished.
The economics are nonsensical too. All of the countries on his tariff list except for the United Kingdom are members of the European Union with a common trade policy. This means any tariff he imposes on those countries will have to extend to the entire 27-member bloc. So much for the trade deals Mr. Trump negotiated to great fanfare last year with the EU and the U.K.
Members of the European Parliament, which still must approve the U.S.-EU agreement, are threatening to put that pact on ice. This bullying plays poorly with the European public, making it harder for politicians to give Mr. Trump what he wants on Greenland or anything else. The message to these countries is that no deal with Mr. Trump can be trusted because he’ll blow it up if he feels it serves his larger political purposes.
The Greenland Tariff War of 2026 imperils other U.S. priorities. The trade tax on Britain could upset an agreement Mr. Trump struck last year under which Britain will pay more for pharmaceuticals in exchange for Washington dropping tariffs on medication imports from the U.K. Speaking of which: Why Mr. Trump would want to head into midterm elections foisting higher prices on voters worried about affordability is a mystery.
President Donald Trump threatened this weekend to unilaterally impose 10 percent tariffs on eight European countries until a deal is reached that makes Greenland part of the United States. In other words, American businesses and consumers will pay higher prices because Denmark, a strong ally which already welcomes U.S. troops and investment in Greenland, isn’t willing to cede territory.
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The president and his allies are increasingly making the case that Greenland is strategically vital and resource rich, but America already has easy access. The Space Force maintains a base there. Denmark has been a particularly strong, committed and inoffensive partner. The Danes suffered one of the highest per capita fatality rates in supporting America’s military response to the 9/11 attacks.
Jessica Riedl tweets: (HT Scott Lincicome)
“Emergency” designations need to be completely overhauled in the law. Presidents & Congress can deploy U.S. troops domestically, impose any tariffs, and disregard all spending & deficit limits simply by slapping the word “emergency” on it. “Emergency” now means “I just want it.”
My GMU Econ colleague Bryan Caplan reflects on his recent debate with the socialist Matt Bruenig. A slice:
Even though Bruenig had a lot of common ground [with Caplan], the debate confirmed my pessimism about practical cooperation between libertarians and the left. On a core emotional level, the left is anti-market. Even when they admit that some kinds of deregulation or privatization would have great virtues, they’re not excited by these virtues. What excites them, sadly, is demonizing business and the rich — then making them suffer for their supposed sins.
The love affair with price controls is not partisan. Sens. Bernie Sanders (I-Vermont) and Josh Hawley (R-Missouri) have already introduced legislation to cap credit card interest rates. New York Mayor Zohran Mamdani (D) won his race promising to freeze rents for 2 million residents. When socialists and populist Republicans converge on a policy, it’s usually a sign that politics has overwhelmed economics.
The political appeal to “do something” is obvious. Americans owe roughly $1.23 trillion in credit card debt, with average interest rates approaching 23 percent. Trump can cast himself as defending working families against Wall Street. Voters love a villain.
The economic logic is just as obvious, even if price-control advocates ignore it. Credit card interest rates aren’t arbitrary. They reflect the risk of lending to borrowers with different credit profiles. Higher-risk borrowers default more often, so banks charge higher rates to offset those losses. A 10 percent cap makes lending to millions of these borrowers unprofitable. Banks won’t offer products at a loss. These borrowers won’t get lower rates. They won’t get credit cards at all.
GMU Econ alum David Hebert ponders competition. A slice:
[Adam] Smith recognized that markets don’t just allocate scarce resources. They cultivate habits of honest dealing. A firm that cheats will likely profit in the short run, but certainly not in the long run. The firm that treats and charges customers honestly builds a reputation, attracts repeat business, and ultimately outlasts the swindler.
Smith referred to this as the “discipline of continuous dealings,” which game theorists have taken to calling “repeated play.” When a firm expects future dealings, either with the same customer or with people that customer talks to, cooperation (not defection) becomes the dominant strategy. This isn’t because people become angels, but because cheaters ultimately get punished when their market counterparts do business with someone else instead.
We use global tariffs to reveal the weights that nations implicitly place on the welfare of their trading partners relative to their own. Our estimated welfare weights suggest that formal and informal rules of the world trading system make countries internalize the impact of their policies onto others to a substantial extent, though not fully. On average, countries place 25% less value on transfers to foreigners than transfers to their own residents. Across nations, we find that countries that put higher welfare weights on the welfare of foreigners also tend to receive higher weights from them, consistent with a general form of reciprocity among nations. Using our estimated welfare weights, we provide a first look at what countries stand to lose, or gain, from the dissolution of the world trading system as we know it.
We’re fortunate that Bastiat’s Window will return to its regular schedule of programming in 2026.
