Trump’s Tariff Wars and the Fracturing Global Economy

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‍I. The Current Focus on Greenland

In January 2026, right after overthrowing the President of Venezuela but just before launching a war with Iran, the Trump Administration ramped up its efforts to annex Greenland. During this period, President Trump’s rhetoric surrounding the Danish territory reached a fever pitch, with erratic threats of both a military invasion of Greenland and the imposition of tariffs on European goods.

On January 17, in response to a near-unanimous opposition by European countries to the proposed annexation, President Trump threatened several European states with blanket 10 percent tariffs starting on February 1, 2026, which would quickly increase to 25 percent on June 1, 2026. He posted on Truth Social that these increased tariffs would be effective until the United States reached a deal for the “Complete and Total purchase of Greenland.”

While responses differed across Europe, by January 18, France lobbied the European Union for the implementation of reciprocal tariffs, and on January 19, Denmark announced the deployment of additional troops to Greenland. Two days later, the European Parliament published a press release raising “serious concerns” over the United States threats to Greenland’s sovereignty and its “transactional approach” to foreign policy.

But before the crisis escalated further, it abruptly faded. On January 21, President Trump backed down. Just four days after issuing threats of military invasion and tariffs, President Trump asserted that the United States would not use military force and reneged on the planned tariffs, instead citing a “framework of a future deal with respect to Greenland.”

While the events surrounding Greenland might appear uniquely volatile, they illustrated a broader, ongoing shift in global politics. As President Trump’s threats showed, tariffs are increasingly deployed as an instrument of geopolitical pressure. Greenland is not the only example of this shift, as the world is entering an era of increased tariff-based economic conflicts.

II. The Three Major Trading Blocs

As illustrated below, the ability to wield tariffs as a political tool in this new era differs dramatically across the world’s three largest trading blocs: the European Union, the United States, and the People’s Republic of China. Out of these three major blocs, The United States and China possess tariff systems that allow for rapid escalation and the preemptive imposition of tariffs to achieve political goals—offensive tariffs. On the other hand, the European Union’s tariff implementation process is slower and can only respond to economic coercion.

Tariffs are powerful as a political tool only if their implementation harms the targeted country’s economy. If country A does not import goods from country B, then tariffs placed on country B’s products by country A will have zero impact on country B’s economy. Globalization of the world’s economy over the last fifty years has created a level of economic integration that has set the stage for tariffs to have great effect. The European Union, the Untied States, and China are not only the world’s largest exporters and importers, but their economies also deeply intertwined, with approximately $2.325 trillion in trade flowing betweenthethree in 2025.

III. Tariffs as Economic Coercion

When implemented to achieve political goals, tariffs are a form of economic coercion. Economic coercion is defined by the European Union as one country pressuring another “into making a particular choice by applying, or threatening to apply, measures affecting trade or investment.” Economic coercion is not new, especially from the United States. Sanctions, or penalties imposed by one country on another to punish or influence their governments, have long been utilized by the United States government.

Conversely, tariffs have traditionally been justified as a method of protecting domestic industry rather than as a form of coercion. For example, countries may raise import taxes as a method to prevent overseas competitors from undercutting domestic manufacturing. However, in the modern era, both tariffs and sanctions are used as a means of economic coercion. For example, offensive tariffs, like those the Trump Administration primarily uses, are not justified solely as fiscal policy, but also a means to extract political concessions (like favorable trade deals) from the targeted country.  

The United States is not the only major trading bloc engaging in the increased use of tariffs as a geopolitical tool. China and the European Union routinely trade tariff jabs over electric vehicle subsidies. Furthermore, tariff tensions between the United States and China are also high, as the two nations remain locked in a tariff war that has spanned nearly a decade.

IV. The Legal and Institutional Frameworks of the Three Blocs

The persistence of these tariff conflicts underscores a broader shift in how major powers conceptualize tariffs as an instrument of strategic leverage. As the United States, China, and the European Union increasingly deploy tariffs to advance geopolitical interests, the legal and institutional frameworks governing such actions take on a heightened importance. In this context, understanding how the three major trading blocs authorize and constrain the use of tariffs is essential.

In the United States, the system of tariff powers is in flux, primarily because of recent pushback from the Judiciary Branch. In the second Trump Administration, the Executive Branch relied on the International Emergency Economic Powers Act (IEEPA) as the primary authorization to implement tariffs, reading the statute “to give the President power to unilaterally impose unbounded tariffs.” Despite this interpretation, the Supreme Court’s February decision in Learning Resources v. Trump held that IEEPA did not give any authority to the Executive Branch to impose tariffs, eliminating IEEPA as an avenue for the Trump Administration to implement its tariff policies.

However, the degree to which eliminating IEEPA limits the Executive Branch from acting is uncertain. Justice Kavanaugh, in dissent, argued that the decision “might not substantially constrain a President’s ability to order tariffs going forward. That is because numerous other federal statutes authorize the President to impose tariffs and might justify most (if not all) of the tariffs at issue in this case—albeit perhaps with a few additional procedural steps that IEEPA, as an emergency statute, does not require.”

Chief Justice Roberts pushes back on Justice Kavanaugh’s assertion in footnote 4 of the majority opinion, stating that the alternative authorities, unlike IEEPA, “contain various combinations of procedural prerequisites, required agency determinations, and limits on the duration, amount, and scope of the tariffs they authorize.”

In the wake of the decision in Learning Resources, the Trump Administration has now turned to alternative authorities to justify its use of tariffs. While legal challenges will undoubtedly follow, the extent to which the Executive Branch can use tariffs as a geopolitical tool remains uncertain.

Conversely, the European Union system lacks the unilateral, offensive approach of the Trump Administration. The Anti-Coercion Instrument (ACI), in force since 2023, allows the European Union to implement tariffs against third countries, but only after the Union or one of its member states is under economic coercion. Unlike American tariffs, which are primarily used as offensive measures, the primary purpose of the ACI is deterrence.

Meanwhile, the Chinese system for tariff implementation is opaque. The decision-making for tariff implementation is concentrated within the State Council. The State Council, through the Tariff Law has the ability to raise and lower tariffs. China’s tariff authority, like the ACI, grants the State Council the ability to implement reciprocal tariffs.

Additionally, China’s tariff system is extremely nimble in relation to perceived economic coercion. On April 2, 2025, President Trump announced increased tariffs on Chinese imports. In response, on April 4, the Chinese government implemented their own tariff measures against United States imports. In May, after trade talks with the United States, China lowered its tariff rates.

This nimbleness stands in direct contrast to the European Union’s approach to tariff implementation. The ACI allows for months of debate at multiple steps in the process, which requires the European Union to determine whether economic coercion exists, and then determine what countermeasures to adopt.

The speed, offensive capabilities, and centralized power of the Chinese and American tariff systems, give both blocs a distinct advantage over the European Union’s system. Thomas Gehrke, a senior policy fellow at the European Council on Foreign Relations, suggests that narrowing decision-making windows, broadening the definition of economic coercion, and lowering procedural hurdles are necessary for the ACI to be an effective deterrent against future economic coercion from China and the United States. As of writing, the ACI has not been used and its procedures have not been tested, therefore its usefulness as a deterrent is uncertain.

Conclusion

The Greenland crisis, adoption of new tariff measures by major powers, and the increased threat of economic coercion in a deeply interconnected global economy all point to the same conclusion: the post-World War II economic order is fragmenting. In this shifting landscape, the evolving legal and institutional frameworks governing the economic tools of China, the United States, and the Europe Union will be essential in shaping the next phase of global politics.

Copyright © 2026 Dawson Wilcox, J.D. Candidate, UC Berkeley Law