The dispute between the United States and Europe over the future of Greenland isn’t the first time the allies have been at loggerheads.

Europe reacts to Greenland threats as it happened: Denmark deploys more troops as economists warn of growth hit The US Treasury secretary has questioned the EU’s ability to agree a firm response to Donald Trump’s tariffs threat, saying the bloc would likely form “the dreaded European working group” rather than take rapid action.

Europe has options, but they are limited and will be difficult to co-ordinate. The 27 members of the European Union, plus Britain, Norway, Iceland and war-torn Ukraine, need a plan they can all live with.

Germany has at least temporarily suspended its military support for Israel, as its leaders and those of Palestinian-backed Hamas now try to agree to the second phase of President Donald Trump's peace agreement.

“European countries own $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined,” Saravelos pointed out. “In an environment where the geoeconomic stability of the western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part.”

The most severe economic escalation would come if Europe deployed its so-called anti-coercion instrument, nicknamed “the Bazooka,” which would allow it to target American services and investment. Under such a scenario, the EU could raise taxes, tighten regulatory scrutiny or otherwise constrain American firms operating in Europe.

President Trump announced new tariffs on European nations if they stand in the way of the U.S. acquiring Greenland. The EU could hit back relatively quickly.