By threatening to withdraw from NATO, Trump can force allies like Denmark into deals such as the one for Greenland. While this leverage is effective for immediate goals, his unpredictable tactics cause long-term damage to America's international reputation and perceived stability.

Analysis of President Trump's actions regarding Greenland reveals a pattern: he follows through on threats unless he receives significant pushback. The most effective pushback appears to be a negative financial market reaction, which has repeatedly caused him to de-escalate.

The Greenland diplomatic row taught European leaders that their previous strategy of delicate diplomacy was ineffective with the Trump administration. By presenting credible retaliatory threats, they discovered they could achieve their objectives, signaling a major shift in transatlantic diplomatic strategy.

The European Union's most potent weapon against coercive US policy is not unified government action, which is slow and difficult. Instead, its true leverage lies in the ability of its large financial institutions, like pension funds, to signal moves that create market volatility and directly influence the White House.

The seemingly bizarre US rhetoric about Greenland is not a genuine territorial ambition. Instead, it is a calculated, strong-arm tactic designed to give European nations political cover to increase their own military spending and adopt a 'war footing,' aligning with US interests against China and its allies.

The U.S. administration's attempt to acquire Greenland and subsequent tariff threats against European allies triggered a direct, named market reaction called the 'Sell America' trade. This saw countries like Denmark actively selling off U.S. treasuries, showing a direct link between diplomatic actions and investor behavior.

Investors feared a US-EU rupture over a Greenland acquisition attempt, pricing in risk. When Trump's speech signaled de-escalation by ruling out force, markets immediately reversed risk-off trends (e.g., equity weakness, weaker dollar). This demonstrates high market sensitivity to geopolitical rhetoric, allowing for a rapid repricing of tail risks.

Even though President Trump backed down on tariffs over Greenland, the episode permanently eroded European trust in the U.S. as a reliable NATO partner. The erratic nature of the dispute raised serious questions about American dependability on more critical issues like Ukraine, suggesting long-term damage to the alliance.

Alexander Stubb argues the world order isn't breaking but evolving. His confidence stems from the protective power of international institutions like the EU, which can counter threats like tariffs and secure trade deals. This contrasts with more alarmist views that see the current instability as a complete system breakdown.