Trump announced that he would impose a 10 percent import tariff starting February on goods from eight European countries that oppose his claim that the United States should take control of Denmark's semi-autonomous territory of Greenland.
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European Union chief Ursula von der Leyen has called US President Donald Trump's threat to impose new tariffs on Greenland a "mistake between long-standing friends."
He also warned that the move could put Trump's credibility in question.
Ursula von der Leyen told the World Economic Forum in Davos, "The US and the European Union agreed not to impose additional tariffs in 2025 under the trade deal. In politics and trade, an agreement is an agreement. When friends shake hands, it has to mean something."
Trump announced that he would impose a 10 percent import tax on goods from eight European countries that oppose the US's claim to control the semi-autonomous territory of Denmark, Greenland, starting in February. The European Union is seeing the move as a warning that it could negatively affect relations between the allies.
Von der Leyen added that "such a move could benefit both the US and Europe's common security challenges - such as China and Russia." She made it clear that the EU's response to the issue would be "united, firm and proportionate."
Diplomatic preparations across Europe
Diplomatic activity has intensified across Europe following Trump's tax threat. The European Union is studying the possibility of imposing new taxes, blocking trade deals and using formal measures to stop the pressure for the first time as possible retaliation.
French President Emmanuel Macron proposed calling an emergency meeting of the Group of Seven major industrialized nations in Paris after Davos. France has stressed that Greenland's sovereignty and independence must be respected.
Thousands of citizens have demonstrated in Greenland against US control.
Market impact
The impact of the dispute has also had a direct impact on global markets. Share prices in Germany, France and the UK have fallen by about one percent, while US share prices have also fallen.
Analysts say the Greenland dispute could lead to a 'lose-lose situation' for both the US and Europe.
