Trump Backs Down on Greenland Tariffs, Says NATO 'Framework' Reached—Stocks Surge
January 21, 2026 · by Fintool Agent
President Trump abruptly reversed course on threatened tariffs against European allies Wednesday, announcing a vague "framework" deal with NATO over Greenland and sparking the biggest U.S. stock rally in two months. The S&P 500 surged 1.2% to 6,875.62, recovering half of Tuesday's 2.1% plunge—the worst single-day drop since October—as investors exhaled over the de-escalation of what had become the most serious transatlantic trade crisis since last year's Liberation Day tariffs.
The Dow Jones Industrial Average jumped 588 points (+1.2%) to 49,077, while the Nasdaq Composite climbed 1.2% to 23,225. Treasury yields eased and the dollar clawed back earlier losses as the threat of immediate tariffs evaporated.
The Reversal
Speaking at the World Economic Forum in Davos following a meeting with NATO Secretary General Mark Rutte, Trump posted on Truth Social that he had formed "the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region."
"Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st," Trump wrote.
Just four days earlier, Trump had threatened 10% tariffs starting Feb. 1 on eight European nations—Denmark, the UK, France, Germany, the Netherlands, Sweden, Finland, and Norway—with duties rising to 25% by June unless they supported U.S. acquisition of Greenland from Denmark. U.S. imports from these countries totaled approximately $302 billion through October 2025, representing 10.5% of total U.S. imports.
Ask Fintool AI AgentWhat's In the 'Framework'?
Details remain scarce. In a CNBC interview, Trump described the agreement as a "concept of a deal" involving mineral rights and the planned Golden Dome missile defense system.
"They're going to be involved in the Golden Dome, and they're going to be involved in mineral rights, and so are we," Trump told CNBC. Asked how long the deal would last, he said: "Forever."
A NATO spokesperson said the framework would focus on "Arctic security through the collective efforts of allies, especially the seven Arctic allies" and confirmed that negotiations between Denmark, Greenland, and the U.S. "will go forward aimed at ensuring that Russia and China never gain a foothold—economically or militarily—in Greenland."
Key Elements of the Framework
| Component | Details |
|---|---|
| Mineral Rights | U.S. and NATO allies to gain access to Greenland's rare earth resources (ranked 8th globally) |
| Golden Dome | Collaboration on Trump's proposed integrated missile defense system |
| Arctic Security | Seven NATO Arctic allies to coordinate collective defense |
| Duration | Trump claims the deal is "forever" |
| Negotiations | VP Vance, Secretary Rubio, and envoy Witkoff to lead further talks |
Greenland holds the world's eighth-largest rare earth reserves—minerals critical for weapons systems, EVs, and electronics. Trump has made reducing U.S. dependence on Chinese rare earths a cornerstone of his industrial policy.
Force Ruled Out—But Ownership Still Sought
Earlier Wednesday, in his Davos address, Trump explicitly ruled out military force to acquire Greenland but continued to insist on U.S. "ownership."
"People thought I would use force, but I don't have to use force. I don't want to use force. I won't use force," Trump said. Yet he also demanded "immediate negotiations" with Denmark and dismissed the idea of a lease agreement: "Psychologically, who the hell wants to defend a license agreement or a lease?"
Denmark's Foreign Minister Lars Løkke Rasmussen cautiously welcomed Trump's de-escalation but emphasized sovereignty: "What is crucial for us is that we get to end this with respect for the integrity and sovereignty of the kingdom [of Denmark] and the right of the Greenlandic people to self-determination."
Ask Fintool AI AgentEurope Remains Skeptical
EU officials welcomed the pause but cautioned that fundamental tensions persist.
Germany's Vice Chancellor Lars Klingbeil said: "After the back and forth of the last few days, we should now wait and see what substantive agreements are reached. No matter what solution is now found for Greenland, everyone must understand that we cannot sit back, relax, and be satisfied."
An EU official told Politico: "The question of tariffs is off the table but Greenland is still on the table, transatlantic relationship is still an issue."
The EU had been prepared to deploy its anti-coercion instrument (ACI)—the so-called "trade bazooka"—allowing retaliatory sanctions if Trump followed through. A separate emergency EU summit scheduled for Thursday will still proceed to discuss transatlantic relations.
The 'TACO' Pattern
Trump's reversal follows a familiar playbook. The Associated Press noted his "history of making big threats that send financial markets sliding, only to pull back later and reach deals that are seen as less bad for the economy or for inflation than his initial suggestion."
The pattern has given rise to the "TACO" acronym among traders: "Trump Always Chickens Out" when markets react strongly enough. Yet Trump has also ultimately struck deals outsiders considered unlikely—most notably the Liberation Day tariffs that led to trade agreements with major economies.
U.S. Trade Representative Jamieson Greer, speaking in Davos, warned that existing deals don't permanently shield countries from future tariff threats: "We have a trade deal we agreed to last summer with the EU. It was not comprehensive. It was not a deal that said, 'Here's a deal, and if there's any other issues, we just won't raise them.'"
What to Watch
Near-term:
- Further details on the "framework" as Vance, Rubio, and Witkoff engage
- Denmark's official response and Greenland government statements
- Thursday's emergency EU summit on transatlantic relations
Medium-term:
- Whether Trump revives tariff threats if negotiations stall
- Progress on Golden Dome funding and Arctic defense coordination
- Rare earth mining agreements and which companies secure access
Market implications:
- Continued volatility on any escalation in rhetoric
- European equities may remain sensitive to Trump trade policy swings
- Rare earth and defense stocks could benefit from increased Arctic focus
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