Europe Braces for Trump’s Greenland Tariffs

0:01Robert Armstrong:Marvel Television's Wonder Man. An eight-episode series now streaming on Disney+. A superhero remake. Not exactly what we'd expect from an Oscar-winning director. Action! Simon Williams auditioned for Wonder Man. I'm gonna need you to sign this. Assuming you don't have superpowers. I'll never work again if anyone found out. My lips are sealed. Marvel Television's Wonder Man. All eight episodes now streaming only on Disney+. When is the AI bubble going to burst? How do you AI-proof your job? How should colleges handle AI and prepare students for a shifting job market? I'm Henry Blodgett, and on my show, Solutions, I've been exploring all of those questions and more with experts who have actual answers.

0:49Robert Armstrong:We hear enough about our problems. Let's solve them. Follow Solutions with Henry Blodgett. Today's number? 3 ,000. That's how many international leaders are set to attend the World Economic Forum's annual meeting in Davos this week. Today's other number is 300. That's how many sex workers will also be joining. Money market's mad. If money is evil, then that building is hell. The show goes on! The folks are never watching. So, so! Welcome to Prof G Markets. I'm Ed Elson. that last joke is actually true. Look it up. It is January 20th. Let's check in on yesterday's market vitals. US markets were closed for MLK Day.

1:39Still, S &P and Nasdaq futures sank 1 % as tensions flared over Greenland. More on that in a moment. Meanwhile, the dollar slid, Bitcoin declined, and gold hit a record high. Okay, what else is happening? President Trump has upped the stakes for a Greenland acquisition, presenting Europe with a new tariff ultimatum. Over the weekend, he announced 10 % tariffs on eight European countries starting February 1st. According to Trump's Truth Social post, the rate will rise to 25 % in June unless there is a deal reached for what he called, quote, the complete and total purchase of Greenland. The targeted countries are putting up a united front, warning this could spark, quote, a dangerous downward spiral.

2:27French President Emmanuel Macron is urging the EU to use its trade bazooka, more formally known as the anti-coercion instrument, which could lock the US out of European markets. Meanwhile, Danish officials are skipping the World Economic Forum in Davos in protest, and Denmark deployed additional troops to Greenland on Monday. European stocks had their worst day in two months yesterday, and gold and silver hit fresh all-time highs, another signal that investors are searching for safety. So here to discuss what is at stake with potentially another trade war between America and Europe, we are joined by pod favorite Robert Armstrong, U.S.

3:09financial commentator for the Financial Times and author of the Unhedged newsletter, Rob, welcome back once again to Prof G Markets.

3:18Robert Armstrong:Good to see you at the end of a very strange weekend. A very strange weekend, indeed. We want to jump right into it. So we've got 10 % going up to 25 % tariffs on eight European countries that have expressed solidarity with Greenland. We've got Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. And let's just start with your initial reactions, Rob. First reaction, is it going to actually happen? As far as I know, the threatened tariffs on any country that trades with Iran have not happened. We had a tweet from the president that was happening. It then just drifted to wherever presidential tweets go when they're not with us.

4:10Robert Armstrong:So, you know, the rhetoric is pretty strong. There was the bizarre text to the leader of Norway. It seems pretty serious. And markets are reacting. but the hard first question you always have to ask is, is this a case of real strategic boldness a la Venezuela? Or is this a bunch of talk? Right. Like so many other adventures or near adventures have been in Trump's world of trade. Right. And it's very hard to tell at the outset. Yes, exactly. And it's exactly what we saw last year with Europe, where he threatened 30 percent and then he went down and then he made all of these exemptions. It seems to me, I mean, again, I always like to remind people, taco was a term that was created by Robert Armstrong, who is with us right now.

5:15I'm someone who generally lands in the taco camp. And this is another case of that for me. For me, I see this. It's a social media post. He just puts it out there. My instinct is taco. What is interesting is we're in this dynamic where we're seeing that markets in Europe are selling off, but also it's MLK day. So the US markets are closed. So we don't know what the markets are going to react like tomorrow.

5:45Robert Armstrong:Okay, let me frame this. Let me steal a way of framing this from someone else. Ian Bremmer, who's one of these people who sort of talks about geopolitical risk for a living. I think his company's called Eurasia Group. Anyway, he had this short video that I think sums this up really well. He talked about the contrast between taco and fafo. Taco being Trump always chickens out and fafo being fuck around and find out. And some countries get the taco treatment and some countries get the fafo treatment. And his point was that the weak get Fafo and the strong get Taco. In other words, countries that put up a little bit of resistance, Brazil, China, Russia to a degree, actually Taco is the most common outcome.

6:39Robert Armstrong:If countries show weakness or are too weak to protect themselves, like Venezuela, they see bold Trump. They see Fafo Trump. So we might ask at this point, is Europe going to be strong in response, in which case we might expect Taco and the situation to stabilize and cool off? Or do they get into a characteristically European mode of tripping over their own feet and their own internal political squabbles, come with a weak and divided response, in which case they get Fafo, right? The hard side of Trump. So I'm not sure that's true, but I think it's a kind of intriguing way to think about it. And I would bet that you are right, that this is a situation where Trump will be prepared to back off, but only if Europe shows willingness to up the ante.

7:35Yes. And by the way, it seems that they do, or at least, I mean, that's what we're hearing with this talk of a trade bazooka, which I've never heard of. This is what Emmanuel Macron has been suggesting, that they use the anti-coercion instrument. They call it the trade bazooka. I love that.

7:56Robert Armstrong:Yeah, I love the anti-coercion instrument. It's like a special axe they keep in a box in Paris or something. You know? From my understanding, it's basically just some export controls. I'm not sure exactly what makes it a bazooka versus any other trade weapon. It just means Europe is committed to a lot of global principles of kind of fair and reciprocal trading with its trade partners. And I think basically what the anti-coercion instrument does is release them from those commitments. So they are, it basically says, it's a situation where you've been nasty to us, and we can be nasty right back.

8:44Even if it is a taco, I think it probably is. It does seem that there is a vibe change that has occurred, and that is, the post and the statement itself is just offensive to Europe.

8:59Robert Armstrong:Yes. So, you know, that's why Macron is reacting the way he has, and you've seen people like Keir Starmer speaking out, and basically any EU leader is coming out and saying, hey, this is unacceptable. You cannot do this. You cannot threaten to just take over the land of one of our allies. Yes. Given how offended everyone is, do you think that that offense could lead to something more substantial like a trade war? Or do you think this goes the way it historically has done, which is they kind of fight a little bit and then ultimately they kind of kiss and make up. God, you're asking me to make a political prediction here.

9:41Robert Armstrong:You know, you haven't lost a lot of money historically betting against Europe's ability to put up a unified front. There's, you know, they have a very consensus-driven system where a small number of defectors can prevent unified action. uh so it makes it they really had they really have to be pushed up to the edge but i think that this this does feel different and i think it not only feels different in the way you talked about it being offensive the president of the united states feels more and more erratic, right? And not, you know, the constant provocations, the tone out of the White House has changed.

10:30Robert Armstrong:The tone of the spokespeople have changed. So, you know, I don't know what pushes Europe far enough to get them to unification, but we're moving in that direction. We're getting closer. But I don't know where the magic moment is, I'm afraid. All right, Robert Armstrong, U.S. financial commentator for Financial Times, author of the Unhedged newsletter, also the Unhedged podcast, which you should check out. Rob, appreciate your time. Thank you for joining us. Pleasure to be here. After the break, OpenAI gets into advertising. And for even more markets content, you can subscribe to my new weekly newsletter.

11:12It's called Simply Put. You can find it at edwardelson.substack.com.

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12:41We're back with Prof G Markets. Ads are finally coming to ChatGPT. OpenAI announced it will start testing ads on U.S. adult users with free accounts in the coming weeks. The company insists it will not sell data to advertisers and that users can turn off ad personalization. It is a stunning reversal from Altman's stance just two years ago when he called ads a, quote, last resort. Well, it looks like that last resort is here. OpenAI is seeking new revenue streams to help fund its massive AI buildout, including a reported$1.4 trillion commitment to infrastructure over the coming years. Here to discuss why OpenAI is finally embracing ads and what that says about the AI business.

13:28We are speaking with Alex Kantrowitz, founder of the Big Technology newsletter and podcast. Alex, you are joining us from Davos. How is it? Yeah, Davos is very weird this year because for a number of reasons. First of all, we're in Europe at a moment where President Trump is threatening to take over Greenland. So obviously some awkwardness there as he's about to hit the WEF summit. But also we're in this moment where companies for a long time used this conference as a place to talk about their altruism. And over the past couple of years, we've definitely seen much more of a shift towards the naked interest and the bottom line.

14:05So they've tried to worm their way back into that social good messaging, mostly by talking about how AI will get us there. There are 48 sessions at the WEF about artificial intelligence where people are going to talk about it, being able to cure cancer and empower the disempowered. We'll see if the message gets across. You seem skeptical. Is that right? I will wait and see. I'll wait and see. Wait and see. I think that's fair enough. Well, we want to get into this move from OpenAI. They are now putting ads on ChatGPT. I think last time we spoke, Alex, you and I were kind of having a debate over whether they should be doing this.

14:47I was on the, and correct me if I'm wrong about this, I remember being on the pro-advertising side. I felt they need to monetize and get this over with. I remember, I think you were on the other end of that. What do you make of this move? They are now selling ads. That sounds right. Look, I think that when you think about the most skeptical perspective of this, which I've seen come across the social feeds in reaction to it, some have said, hey, listen, you're using AI. You're about to, you know, if you really believe that you're close to artificial general intelligence and disrupting, you know, the way that we work and these big breakthroughs, then why are you resorting to the sort of crude as possible form of business on the internet, which is advertising?

15:31Is that an indication that you don't really believe in what you've been telling us this time? Clearly, I think there's a couple things that are happening here. First of all, it's the imperative for growth. The ad tier is going to give people more access to OpenAI's models. So you'll be able to chat a little bit more. And I think there's a hope that that will bring more people in. It seems to me there was an interest in getting towards a billion weekly active users. By the end of the year, I've heard some rumblings of that. They fell short. They're at 800 million now. And especially as we gear up towards an IPO potentially, I think that will happen next year.

16:11They're gonna really wanna continue to show that growth. So for me, it is a, you know, I think I'm coming around. It's a necessary evil for this company. It'll be a good business. But the drawback is one thing goes wrong, and all of a sudden you have a very big scandal. And I think that's something worth paying attention to. What are the kinds of things that could go wrong here? What could lead to that blow up or a scandal? Well, there's no product that knows you better than a chatbot, especially if you spend time with a chatbot. And one of the things that OpenAI in particular has been working on has been making these bots remember us better.

16:48Memory is going to be a big initiative for OpenAI in 2026. So the bot will be able to recall conversations that you've had years previously. And there's a tremendous amount of trust that goes into interacting with a product that remembers you that way and becomes, in many people's cases, a companion. That doesn't necessarily mean romantic, but people have developed friendship feelings towards it or even some sort of bond with the bot that you believe it has your best interests at heart. The second this thing starts pitching things that get a little too close to home based off of the data that it has about you, it could get bad.

17:25And remember, it only takes one really bad or a few really bad stories for people to get the ick about a company that does advertising. Most of Facebook's advertising is like app install ads for games. But a couple of ads that get a little too close to home, everybody says Facebook's listening to us. And that's the worry for OpenAI. Yeah, Altman previously said that ads combined with AI are, quote, uniquely unsettling. He also described that combination as a, quote, lost resort. so it does appear that open ai is reaching its last resort it seems like that might be what this is something i i like to theorize about is what would happen if open ai were a public company we don't know because it's private company we can't look at the stock price but what what direction would the stock be moving in i'd love to just get your views on this if OpenAI were a publicly traded stock, do you think it would be up or down following this?

18:28Oh, it would shoot up. And I know I'm talking both sides of this because I really am wrestling with it. It's complicated. But the market would react very positively to OpenAI introducing ads. Ads are an extremely high margin business. Famously on the internet, you only need a couple of salespeople or you can even automate the sales process. And then those ads can extend across large audiences and you can make a lot of money. Google has done a great job with this. Facebook has done a great job with this. Even Amazon. I think it's one of the least heralded stories of, you know, at least with the big tech business, Amazon has done amazingly with advertising.

19:04And it's become one of the biggest, highest margin businesses within that company. So I think if the market saw, oh, you have your subscription business, and now you're introducing this high margin ad business. We've seen it before in places like Netflix, which has made a very similar move. and it's working out well, very well for them. So I think that stock would go right up. Yeah. Something else you said there, which I think is fascinating and also very true is this idea of getting the ick with open AI, which I think is an underrated element in the AI race. If people decide that they have the ick on any given chatbot, that will decide the trajectory of this economy.

19:46And it does seem in the past few months or so that people are beginning to get the ick on open AI. They're kind of getting icked out by Sam Altman and his media appearances. And I wonder if ads add to that dynamic. I think back to, you know, that great scene in the social network where Justin Timberlake is talking with Jesse Eisenberg, Mark Zuckerberg, and they're talking about ads. And he's like, you can't run ads because ads aren't cool. And I think about this with this too. I mean, to me, I think they kind of need to do it because they need to monetize. They need to show that to investors. But at the same time, ads aren't cool.

20:28And if you're getting ads in your chat bot, is that something that immediately gives you the ick and causes you to resort to other products? What do you think of that possibility? Yeah, well, I would say, first of all, the user numbers do suggest that people still really like open AI. They like the products. They like chatting with open AI. They've enjoyed Valsora for one as a company that they trusted with their own faces pretty much to make AI videos of themselves. So there's still a lot of trust in open AI. And I think that's a very, very valuable thing that the company has. It has been the company that's pioneered this.

21:03People have given it a lot of trust, a lot of information, their data, and they've seen results from it. And so So that to me, again, is the risk here, is when you do advertising. If you don't do it tastefully, basically 100 % of the time, you do risk having people feel, oh, I don't know if it feels so good to use this product anymore. Maybe I'll try the others. And as these bots, as the context windows get bigger in these bots, sometimes you can just ask. I mean, imagine if you want to switch bots, you ask open AI, hey, print me out a summary of our interactions. Tell me what you know about me.

21:37Copy and paste it. put it into Gemini. Now, all of a sudden, Gemini has picked up all those preferences. It won't be that difficult to switch. And so they have to be very careful when they roll this out that they do it in the right way. What I've seen so far, I like. But again, it only takes a couple of bad attempts and then you're really in a bad place. When we look at some of the other chatbots, so Claude, which is Anthropics chat product, which has gotten a lot of press recently because of Claude Cowork, which they recently announced, which went viral and everyone was talking about it. It seems really impressive.

22:12Gemini has also been getting increasingly popular, increasingly making headlines. We're seeing a lot more usage. Just going into 2026, who do you think is going to win the AI race this year? I've said, I think maybe Anthropik's going to pull ahead. But, you know, as you say, everyone's still using ChatGPT. it's still the most popular. If you had to place a bet on any one of these AI companies and AI products, who do you think is winning in 26? Well, I would say that there's multiple different races going on at the same time. So you have OpenAI running the consumer race. You have Anthropic running the enterprise race.

22:50They could both win and be very big companies in their own respect in two different categories. And then you have Google, which maybe is a blend. Maybe they They can use AI for enterprise. They can use AI in their existing products and continue to build off of that. But I'm not going to run away from the question. I think it's a fair question. My money's still on OpenAI. I still think OpenAI is going to win this thing when all is said and done. All right. Alex Kandrewis, founder of the Big Technology Newsletter and Podcast, joining us from Davos. And it's late there. So we really appreciate your time.

23:25And thank you for joining us and enjoy the rest of the conference. Thank you so much, Ed.

23:34One last tech story before we close. Last week, an AI company called ASML became the third European company in history to reach a market cap of half a trillion dollars. For context, ASML is technically a lithography company, but we call it an AI company because they make the lithography machines that are used to make AI chips. So it's basically an AI company. Now, why did the stock surge? Well, it was actually because of the earnings of another AI company, and that company was TSMC. As you may know, TSMC is the Taiwanese chip maker. Last week, they announced they will be spending$56 billion on chip manufacturing.

24:16And the reason that is important for ASML is because TSMC is ASML's largest customer. So that means a big chunk of that$56 billion will be landing on ASML's income statement. That's why ASML shares rose 7%. That's why the stock hit a record high. Now, why are we highlighting this? Well, because as you might remember, ASML was one of our stock picks last year. Back in July, we said on this program that ASML was a buy. And the reason we were so bullish was because, one, the company was just perfectly positioned for the AI boom, and two, it was receiving a multiple it didn't deserve, largely because of its own concerns about geopolitical conditions and tariffs.

25:01Concerns that, by the way, were not reflected across the rest of the market. It was a slightly complicated thesis. I won't go into the full details, but if you want them, go check out our episode from July 17th. The central idea, however, was the following. ASML had this habit of under-promising and over-delivering. And it seemed to us that investors hadn't quite figured that out. Now here comes the brag. We recommended this stock at$750 per share. As of today, it is trading at$1 ,359 per share. In other words, the stock has risen more than 80%. That means that ASML has generated five times more returns than the S &P over the past six months.

25:47And I have to say, aside from Google, this might be one of our best calls last year. Now, at this point, the company is fairly valued. It isn't really the buying opportunity it was, at least in our view. We consider this a hold, not a buy. Therefore, I don't really have investment advice here. The reason we bring it up is entirely selfish, and that is we wanted to take a victory lap. So there you have it. Historic run for ASML. Congrats to those of you who did buy back in July. And if you did, let us know in the comments. We'd love to hear from you.