EU prepares €93bn tariffs in response to Trump’s Greenland threat

Good morning and welcome back to FirstFT Asia. In today’s newsletter:

• EU prepares retaliation for Trump’s Greenland threat

• China pours cash into Belt and Road Initiative

• Can India be luxury’s next big thing?

• Larry Fink’s bid to revive Davos

EU capitals are weighing their response to Donald Trump’s latest threats over Greenland, in the most serious crisis in transatlantic relations for decades. Here’s what you need to know.

What’s happening: EU capitals are considering hitting the US with €93bn worth of tariffs or restricting American companies from the bloc’s market in response to Trump’s threats to Nato allies opposed to his campaign to take over Greenland. The US president, who has demanded permission from Denmark to take control of Greenland, on Saturday vowed to impose 10 per cent tariffs by February 1 on goods from the UK, Norway and six EU countries that sent troops to the Arctic island for a military exercise this week.

Critical talks in Davos: The retaliation measures are being drawn up to give European leaders leverage in pivotal meetings with the US president at the World Economic Forum in Davos this week, officials involved in the preparations said. “There are clear retaliation instruments at hand if this continues . . . [Trump’s] using pure mafioso methods,” said a European diplomat briefed on the discussion. “At the same time we want to publicly call for calm and give him an opportunity to climb down the ladder.”

A red line is crossed: Since Trump returned to power, EU and Nato capitals have bent over backwards to find compromises to suit the White House. But Trump’s tariff threats against the UK, France, Germany and five other allies crossed a red line that demanded a change in strategy, almost a dozen European diplomats and officials told the FT. “It looks like the days of trying to appease Trump are finished,” said one senior European official.

• ‘Europeans project weakness’: US Treasury secretary Scott Bessent said that Europe was too weak to guarantee Greenland’s security, as the US refused to back down on its demand to take control of the strategically important island.

• European defence stocks surge: The sector is enjoying a blistering start to 2026, amid US threats to take control of Greenland and tensions with Venezuela.

• Opinion: To avoid the worst outcomes, European leaders need to push back against Trump now, writes Gideon Rachman.

Here’s what else we’re keeping tabs on today:

• Chinese economy: China publishes fourth-quarter GDP and a batch of data for December, including the house price index and fixed assets investment, retail sales and industrial output figures.

• Japan: Prime Minister Sanae Takaichi is expected to announce a snap general election for February 8. Will the resulting uncertainty dampen pressure on the Bank of Japan to raise rates? 

• Italy-South Korea relations: Prime Minister Giorgia Meloni meets President Lee Jae Myung in Seoul to discuss bilateral co-operation on issues including trade, AI and defence.

• Vietnam: The ruling Communist Party holds its 14th National Party Congress to select its top leader and set key targets until 2030. (Reuters).

Five more top stories

1. China’s flagship overseas infrastructure finance programme the Belt and Road Initiative increased by three-quarters to a record $213.5bn in 2025 as Beijing sought to take advantage of wavering US influence around the world by pouring funding into development projects. Here’s what drove the surge in new investment.

• China battles price wars: Beijing has launched a wave of regulatory probes into China’s largest tech groups, as policymakers take action against deflationary pressures in the economy.

2. The Board of Peace set up by Trump to oversee Gaza will have a broader mandate that could allow it to rival the UN and mediate in other global conflicts, according to the charter sent to prospective members. Countries that join the board will serve a limited three-year term unless they contribute more than $1bn within the first year of its operations, the copy says.

• Syria: The Syrian government announced a ceasefire with Kurdish authorities yesterday, in effect dismantling more than a decade of self-rule by Kurds over swaths of northern Syria.

3. China’s military has escalated its campaign of pressure against Taiwan by violating the island nation’s airspace with a drone for the first time. A Chinese surveillance drone entered the airspace of Pratas, a Taiwan-controlled island in the South China Sea also known as Dongsha, for four minutes on Saturday.

• EU-China relations: Brussels is to propose phasing out Chinese-made equipment from critical infrastructure in the EU, barring companies such as Huawei and ZTE from telecommunications networks and solar energy systems.

4. Latvia’s central bank governor Mārtiņš Kazāks has urged European policymakers not to be “naive” over the fact that the bloc is already “at war” with Russia. Kazāks, a member of the European Central Bank’s governing council who is a contender to become ECB vice-president, stressed that central banks and the financial system needed to prepare for further escalation. Read the interview.

5. Sequoia Capital is lining up a big investment into Anthropic, throwing its weight behind the AI start-up for the first time as part of a funding round set to raise tens of billions of dollars. The Californian venture capital group is joining a funding round led by Singaporean sovereign wealth fund GIC and US investor Coatue, which are contributing $1.5bn each.

News in-depth

Slowing demand in China has pushed luxury brands to seek pockets of growth in new markets, especially India. But the country remains difficult to develop because of logistical challenges, a lack of luxury shopping malls and the tendency of wealthy Indians to travel to Dubai, Singapore or countries in Europe to shop. Can India be luxury’s next big thing?

We’re also reading . . . 

• Larry Fink interview: The BlackRock chief executive is leveraging his extensive Rolodex to revitalise the scandal-hit World Economic Forum.

• Fitness trackers: Thanks to his sports watch, Tim Harford is exercising regularly and preparing for his first marathon. But is the fitness watch really to be trusted?

• Bad bonuses: Anyone who stays long enough in investment banking experiences at least one bad compensation round. Craig Coben shares lessons for aggrieved bankers.

Chart of the day

A historic downturn in demand for Scotch, whiskey, cognac and tequila has forced drinks makers to mothball distilleries and slash prices to shift bottles piling up in warehouses. Meanwhile investors have been debating the extent to which the slump is being driven by more profound societal changes.

Take a break from the news . . . 

Thanks to VAR technology, football refereeing is more accurate than ever. But football fans are miserable, even though “glaring errors are now even rarer than successful Manchester United signings”, writes Henry Mance.