WITA Panel: Greenland Saber Rattling Could Blow Up EU Deal

Dan Mullaney, a retired career official in the Office of the U.S. Trade Representative who led negotiations with Europe, said during the weekly Washington International Trade Association podcast on trade issues that there had already been "rumblings" from European politicians that the expansion of the Section 232 actions on steel and aluminum to derivatives was a violation of the agreement.

"I think Europe is obviously very concerned about what happens vis-à-vis Greenland, and there's already been some discussion about whether Europe should be ratifying a deal with the United States if this Greenland situation is going to start exploding," Mullaney said in the podcast that aired Jan. 9. "Of course, you know, if that picks up some momentum, I mean, that could blow up the U.S.-EU deal."

Chris Padilla, a former U.S. undersecretary of commerce for international trade, said he thinks tariffs are going to remain "the preferred U.S. tool of leverage" in Latin America, rather than gunboat diplomacy.

"The circumstances in Venezuela are unique and while the president has made some threats about Mexican cartels and made some comments about the president of Colombia, I think we're a long way off from seeing similar intervention in those countries," he said.

However, Padilla said, he has heard from businesses concerned that "this new assertive military posture could negatively affect the USMCA review." However, Padilla said, most North American trade "is still duty-free under USMCA for the very good reason that if we were to pull back from it the economic effects would be immediate and severe. And the administration knows that."

Former career USTR negotiator Wendy Cutler, who led negotiations for the Trans-Pacific Partnership, mused that the USMCA renegotiation could be used to cudgel Mexico into setting up a new structure for the U.S. to control natural resources there. But Mexico's oil is a political red line, she noted.

"I think [Mexico's President Claudia] Sheinbaum, she's done an incredible job kind of navigating the relationship successfully in 2025, but we're sure putting her to the test this year."

As she has before, Cutler said she thinks the U.S. wants to maintain the trade status quo with China in 2026.

Moderator Joe Damond, chair of international trade policy at Crowell Global Advisors, responded, "To me, that introduces a certain incoherence in the policy. I mean, if you are going after everybody but the country with the biggest trade deficit with the biggest threat to the U.S. economy from an economic security perspective -- what kind of a strategy is that?"

Several panelists said a pause on escalating tariffs might be broader than just in North America and China.

Mullaney said, "I wonder whether there is a reflection within the administration that the tariff policy, at least as has been implemented so far, has created a drag on manufacturing, and that needs to adjust?"

He wondered if they'd make quiet exemptions and import licensing to improve manufacturers' bottom lines.

Padilla responded that for part of 2025, it seemed like a new tariff was announced each week.

"The last major tariff increase announced was in the last week of September," he said, which was the Section 232 action on lumber and certain wood products. The 25% tariff on kitchen cabinets, upholstered furniture and bathroom vanities was supposed to go up to 30% on the furniture and 50% on the cabinets and vanities in 2026.

"And then on New Year's Eve, they came out and said, 'Well, we're going to delay that tariff until 2027,'" he said.

He added, "The 232s on semiconductors and pharma seem to be in the deep freeze. I think we've passed the dates by which the reports were supposed to have been issued."

However, Padilla said, it doesn't mean tariff hikes are over. He said that if Trump loses the case on international emergency tariffs at the Supreme Court, he thinks the president could turn to another broad statute rather than the 15% balance of payments temporary tariff.

"You cannot underestimate how much the president loves the ability to be able to drop these tariffs on a country on a moment's notice," he said. "And 338 is the only way to do that, right?"

Damond replied, "And people say that's an audacious legal strategy, but when has it ever stopped them before?"