Live from Davos: Greenland Shock Tests Europe’s Spine—and Strategy—at Davos

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts. Radio. News. President Trump is taking this economy in a different direction. He ran on that. He promised it. And now he's delivering. We're in the process of imposing reciprocal tariffs. This is going to hurt our economy before we get to any possible retaliation. Thank you for being such a pro-business, pro-innovation president. We're very excited to see what you're doing to make all of our companies and our entire country so successful. The big promise was that he was going to bring down prices and make America affordable again. And everything he's done is the opposite of that.

1:41We have the greatest economy in history. This economy, in my opinion, is going to blow it away. Let's put it this way. It's going to be a very interesting Davos.

2:02I'm Stephanie Flanders, Head of Government and Economics at Bloomberg, and welcome to Trumponomics from Davos, the podcast that looks at the economic world of Donald Trump, this week from the top of a mountain. How he's already shaped the global economy for the movers and shakers descending on Switzerland for the World Economic Forum this week, and what on earth is going to happen next. We're recording this on Monday 19th of January at Bloomberg House, close to the main conference centre in Davos, and I have some of Bloomberg's wisest with me to discuss the next chapter of Trumponomics, what the president might have in store for Davos men and women when he speaks here later this week.

2:46First, welcome to the stage. Anne-Marie Horton, who is familiar to many as a co-host and roving DC correspondent, for Bloomberg Surveillance on Bloomberg Television. Frida Natarajan, who is Bloomberg News' chief Wall Street correspondent. And our editor-in-chief, John McElfay.

3:10I was thinking on the way here, there is a sense of kind of deja vu because exactly, you know, turn the clock back 12 months. John, you and I were here. Maybe some of the audience were here. But if you think of what has happened in the last 12 months, I can't think of much else that has stayed the same in this first year of Donald Trump's second term. We will have noticed that quite a lot in the World Economic Forum agenda, the names of the official sessions have changed quite a lot, even less about climate change, diversity, inclusion. And I've noticed a lot of dialogue and honest conversations.

3:48That seems to be the sort of title of most of the sessions. John, since President Trump confirmed relatively early that he was going to come, we have, I think, a record number of world leaders who've all rushed to come too. Quite a few of them want to have an honest conversation about Greenland. This crisis over Greenland is happening in real time, but could it possibly be resolved this week? Or, given the mood music we're hearing, could this be the week that Europe decides, with Donald Trump, it's not really the art of the deal, it's the art of fighting back? I suppose, Paul, two things. It is a kind of monarchical administration.

4:22So the king comes somewhere, everyone else immediately shuttles across. It's very similar to the kind of 16th century or something when Louis XIV decides to go somewhere and everyone comes. That was a bit later than the 16th century, but the same idea. I think in terms of whether Europe fights, yeah, I think this is. I think this is the one thing which even the somewhat jelly-spined leaders of Europe, they really can't take someone just grabbing part of their territory. And I think you've already seen in people like Keir Starmer, Emmanuel Macron, Mertz a bit, you've seen people saying, look, this really isn't going to work.

5:01The division is coming about what exactly the response would be with this issue about whether they go to tariffs or whether they look for other means. And I think the reason why is because this is such a strange thing. It's not really possible to declare that this is within the normal bounds of national security. It's just simply saying, I want to increase the land area of the United States of America, because most of the things to do with security, you can cover through bases and things like that. So I think even for the Europeans, and let's be really honest, no one has ever lost money betting against the Europeans caving.

5:42then actually in this particular case I think this is such an outrageous thing they will do something and the fact he's come out this morning with the thing about which we reported first about being annoyed with the Norwegians for not giving him the Nobel Peace Prize that adds to the general sense of it being a sort of monarchical decision and I think there's a certain point at which other democracies can't really live with that. Prime Minister Keir Starmer at a press conference today on Monday, and you got the sense that he just had felt he had to respond because of the sheer weight of public opinion over the weekend.

6:15And so any decision about the future status of Greenland belongs to the people of Greenland and the Kingdom of Denmark alone. That right is fundamental, and we support it. You have to feel amazingly sorry for Keir Starmer, not that we do that often. But Keir Starmer, sort of four or five days ago, it wasn't looking too bad. He thought the one part of his administration that had gone reasonably well was foreign policy. And he had got a special deal with America and he got a sort of deal with Europe. And then to get exposed on something where even he will find it difficult to back down, I think that makes it very, very hard.

6:59I think in the end, taking territory, that is the whole basis of why the West has rallied behind Ukraine. It's very difficult when one of your allies does it. I want to get onto the sort of corporate perspective on this, but just one more on Greenland. I mean, you're right that Europe doesn't have a reputation of having been really hard-nosed on these things. And the striking thing about the year since we were last here was how much Europe caved to pretty much everything. There was no retaliation on tariffs. Now they're talking about red lines, but they're also only talking about sending 15 individuals to Greenland as opposed to 15 ,000.

7:40I think Trump said, surely the French have sent 15 people. He thought they meant 15 ,000, and it turns out to be 15 people. I mean, realistically, how can there be a muscular response? There's division on that, and there is obviously people like Orbán in Hungary who can make things difficult. But I think straightforwardly, Trump's biggest problems at the moment is, many people would bet he's going to lose the midterms. What's the biggest issue there? Affordability. A full-on tariff war. I think the Europeans, at least in this case, have the ability to call that in. They've actually prepared all the ammunition before.

8:17Again, a jelly-spined group of people. In this particular case, they actually have a weapon prepared for themselves. So they don't have to go through all that prevarication. Well, Anne-Marie, we've mentioned the domestic front and affordability, which is a great buzzword in the US for this year as we go to the midterms. The president, to most people here on the world stage, seems to be at the peak of his powers, and he's extended those powers domestically enormously. But we have had in the last few weeks a sort of sign of some pushback, Like behind the scenes, a lot of the spending bills, spending cuts that the administration was hoping to see in domestic programs have all been sort of wound back in Congress.

9:00We've had a pretty vigorous response, even from some senior Republicans to the further attack on the Federal Reserve. We may even get a decision this week, even before people are listening to this show, from the Supreme Court saying that he can't actually use tariffs for anything he wants. I mean, is this possibly the high watermark for Trumponomics domestically anyway? Including maybe these tariffs he's talking about for the Europeans. I think for Trump right now and the whole White House, they are just laser focused. Their North Star is Tuesday, November 3rd for the midterm elections. To John's point, conventional wisdom, they're likely going to lose the House.

9:36This is his last opportunity. And polls continuously show that Trump ran on affordability. He ran on inflation being too high, and there are still price levels that are hurting everyday Americans, especially things like groceries, even though things like gasoline have come down. So in his speech here, he will have the domestic audience in mind. They've already teased out a number of issues. Capping credit card fees, which I know Shree is going to talk about, housing, how to get more Americans on the housing market, going after defense contractors about their dividends and buybacks, given the fact that the United States has a trillion-dollar defense budget, and they are obviously privy to that.

10:14So he's really going towards these populist policies that you would hear from the likes of Senator Elizabeth Warren or Senator Bernie Sanders who tried to attract Americans to stick with him ahead of the midterm elections. I think his biggest issue in Davos is, does that message get completely muddled by what many in Washington would call a distraction for something like Greenland? He lives through how things will be seen on TV. And here you have a massive global stage. But to your point, he's also going to be speaking to a domestic audience. How is he going to balance those two things, especially when a lot of people here will be looking at the U.S.

10:52economy and saying, whatever we say, it's performing better than most of ours? U.S. economy is doing well. GDP is doing well. Stock market's at a record high. Even though there have been concerns about Fed independence, the market has shrugged it off. I mean, the bar market only moved when Trump said on TV to Kevin Hassett, I think I'm going to maybe keep you where you are. So they're potentially pricing in someone a little bit more credible or someone like a more hawkish Kevin Warsh. I think Trump's main message is going to be talking to what he would call the global elite and how something like the World Economic Forum has some of the smartest, most elitist people in the world, but it hasn't delivered for everyday people.

11:29To your point earlier, you see the different names on the panels. It's not about diversity, equity, inclusion, and climate. It's actually about the basics, what I think a lot of conservatives in America would say the World Economic Forum has strayed away from. I'm told the speech is still being written, and maybe by the time he gives it, it'll be written a few more times and lots of tweaks. See whether the autocue is working. Yeah. He likes to weave, so he definitely will go off script, I'm sure. He'll call out individuals. You know, I've traveled with him now a lot. I'm sure if he sees Jensen Wong, he'll immediately say, Jensen came to support me.

12:02So he definitely will go off script where sometimes you get more interesting comments. But I think that's how he's going to frame why he decided to come to bring the largest U.S. delegation to Davos.

12:25Sridhar, Amari mentioned that he's been lurching towards quite a lot of populist options for affordability and often feels like every morning and there's a new one that's come through and through social posts whether it's capping credit card fees it's 10 percent and stopping private companies from buying residential real estate. I mean, some of these things, you know, they got used to tariffs. But some of these things really go to the business model of some of the world's most successful companies. And the truth is, even though the US economy is doing so well, the company stocks are doing so well, the CEOs are not going to bed every night, not worried, they are waking up with a headache, because there is real tension.

13:07John talks about the jelly spine political leaders in Europe. What do you talk about corporate leaders, corporate America across the globe, like invisible spine? We are dealing with a world of radical uncertainty for them. Former UK Prime Minister Rishi Sunat talks about this idea that the old world order is gone. The order that businesses got used to, the rules-based system that we all got used to, that's gone. There's no point sitting around and moaning about it. So what's interesting is when you talk to the CEOs this week. The philosophy right now at least seems to be don't think about Trump.

13:40They're trying to shrug it off. They're trying to focus a business's hand and saying my job is to run the business. If the U.S. were to attack Iran tonight, tomorrow morning I still will have to run a business. That works until it doesn't, which is again when we talk about how this new year has started off. We've gone from Venezuela to housing to ideas on credit cards to before Trump left for Davos this threat about suing America's largest bank, JP Morgan, you can't hope that the fire will not come to your front door and operate your business that way. Yeah, and I have to say, full disclosure, as a former employee of JP Morgan, you do notice that Jamie Dimon did actually come back pretty forcefully on that threat of 10 % of capping of credit card interest.

14:28And And understandably, since it is such a major part of JP Morgan's business, you say they're trying to just act as if it will go away or just hope that it'll go away. But they have to also observe that this is such an unpredictable administration that any amount of currying favour and all the things that they've done that they thought would protect them don't seem to protect companies. I mean, Exxon has also been sort of punished for being a little bit honest about how long it might take to get oil production back in Venezuela. I mean, is that also causing some chief executives to think about plan B rather than just being totally focused on the US?

15:09Which also, by the way, goes back to the point about Jamie Dimon forcefully responding to the credit card cap proposal, the rate cap proposal. what all the CEOs right now are doing are choosing to be silent by and large, but responding to very specific policy changes. But when you have a lot of craziness across the board and you don't have a voice in unison, you don't have a corporate block as such, then they will get steamrolled again and again and again. The thing is the pragmatic approach they seem to be taking right now is all the growth is in the US. Every extra dollar you have, you want to invest it back in the US.

15:45So it almost makes sense for them and the most practical approach for them is right now align themselves and line up behind the muscular and political will of the United States. Much harder for companies outside of the US to take such an approach. I mean, for the rest of the world, John, and you're also someone who's kind of written books about the operations of capitalism. I mean, it's not just that Donald Trump has sort of taken us away from a rules-based world and international norms and all of those things that we talk about all the time. sort of feels like it's also it's about everything being on the table all the time like if you're an electrician and you're trying to mend a bit of the circuit you normally disconnect it from the rest of the circuit in order to fix it but with him everything is live all the time whether you got the peace prize can blow up your trade relationship or your defense relationship I mean how does that change the way the global economy works two different things one is very much the what Shridhar and Anne-Marie were talking about, which is kind of Trumponomics.

16:42It's about Trump. And as you say, everything is on the table. Anything could happen. And I think that is a kind of monarchical thing. There is a king who any morning can wake up and decide to head in a particular direction. And on the whole, you are basically best, if you're running a business, kind of keeping your head down, as you say, taking longer-term decisions where you can. And if he actually really physically attacks something which is absolutely crucial to you, like credit cards with JP Morgan, yes, you fire back on that. But the general advice to CEOs at the moment is try and stay friends with him, try and take advantage of him when he's spending money for some particular reason, but don't do it.

17:20But the more difficult world, I think, for CEOs, which you could argue goes back to COVID as much as anything, is this world where suddenly you are going to deal with a world where government of all sorts matters much more than it did. and you're also dealing with an America, Trump is very keen on pushing China and he is protectionist, but you're going to come out of this, I think, regardless of whether you end up with son of Trump, daughter of Trump, or a Democrat, you're going to end up with America which is still, I think, a much more protectionist and a much more kind of keen to take on China in the international sphere than you went into it.

17:59So I think basically businesses are taking one set of decisions which is just how do we get through this next period? And the monarchy may last to November, or it may last all the way to two and a bit years to the end of the presidency, and we'll wait and see what happens in the midterms. But their betting will be that Trump will become gradually less powerful. But you have this other longer-term world underneath it, which is much, much harder, I think, for many companies, especially global companies, to try and navigate. But that's why I wonder, when one talks about Plan B, right now, at least in the advanced economies, where the growth is in the US, but you see Canada, others talking about diversifying their alliances, opening up new trade agreements with China.

18:47They may not be the most attractive partner, but they might well be the most predictable and reliable partner in this environment. That's interesting. If you look at where Canada has ended up, because if you buy what I've said, and virtually every poll shows it, Americans feel China is a competitor in a big way. You could argue that if you were advising governments around the rest of the world, you would say, look, no matter what Trump does, it really doesn't make much sense for you to cozy up to China. because actually that's going to be an issue in American politics forever. And America is always, perhaps increasingly, is going to get more and more strident about that.

19:26And yet there you see Canada beginning to move in that direction. Europe as well, you hear people, quite sensible people, saying, no, no, we need to have a plan B, not just the conventional Paris consensus, one could call it, that America is generally wrong about most things. Quite sensible people are saying, we do need an alternative. That is a consequence, I think, of Trump. But also just talking about your plan B, just to prove how difficult it is to plan for all of this, if you were thinking about inauguration a year ago, you were pretty certain that China will face the brunt of the first year of Trump 2.0.

20:00At least that was the rhetoric coming out. One year later, what you have is record trade surplus for China, the maximum number of listings on the Hong Kong exchange. They've come out pretty well. They don't look to be struggling as much as, say, your traditional allies, where all the pain point has been focused on, focused in Europe, Canada, and elsewhere. So how do you plan for a world like that, where you come in with the assumption, the one thing you were certain about is that Trump is bad news for China, but when you look at 25 % of the second term that's already passed, it's nowhere close to that.

20:31I think that ties very quickly into the first conversation, because at least somebody close to Starmer, somebody close to Macron, and we say, look, China stood up to Trump and it did okay. Europe is not without some degree of leverage in these things. And China was able to have that surplus with actually their exports into the United States going down, which means they're pushing their products in other markets. And I think this is the problem Europe's in. And this unintended consequence of some of Trump's policies, you would want, from this administration early on, talked about like a North America fortress to combat China.

21:04but we just sort of lost Prime Minister Mark Carney. We lost the Prime Minister of Spain, Sanchez, and Europe is being hollowed out, its industrial base, by China. Look at all the deals that are being done with BYD. Look at what's going on with Germany. And I think the Trump administration would want Europe the same way they acted about NATO, anchor the conversation to this extreme, reports in his first term, is he going to leave NATO or not? The end goal was he got European countries to increase their defense. I think the end goal this administration would like to see is them take a harder line on China.

21:36But that's incredibly hard to do when you're talking about going after Greenland. This is the flip side that is negative for the U.S. of having everything be on the table. You can't expect your closest allies to back you, whether it's on Ukraine or in Gaza or on China, if you're attacking them on all these other fronts. Right. Although Trump might use it as points of leverage to get to end destinations. But it is true. He views everything as a negotiating, no deal is really ever done. It's just a constant conversation. But if no deal's ever done, what's the point of doing a deal? It's a great question.

22:15I think that might be, for me, that's the question of this week, I think, or at least that chief executives might ask. It's a very bizarre thing, Greenland. It's been a long time writing about conservative America. If Trump deals with Iran, if Trump deals with Cuba, he will go into the conservative halos of history. He was the man who managed to change Cuba, the man who changed Iran. Nowhere in all the millions of words that have been written in the Republican Party and Conservative America is the word Greenland appeared once. It wasn't considered a core priority of the right in America to want these things.

22:51Venezuela may be quite useful. They were a pain in the neck, but it's not as big as some of these other things. So why exactly is he going this hard on it.

23:13So just shifting back again a little bit to the domestic, Anne-Marie, if the Supreme Court does rule that the president can't just slap tariffs on any country he wants for any reason, or at least not without congressional approval, how does the administration respond to that? Trump has talked about ahead of the midterms this thing called a tariff dividend, which is very circular, set up high tariffs, but then give out to American consumers$2 ,000 checks. I don't think there's any appetite for this in Congress, but it doesn't mean the president is not going to talk about it and make it a priority.

23:46So they won't be able to use that money. We potentially could see some movement in the bond market, which actually is something that has been a check on Trump. It was a massive check on Trump in April. That was the moment he decided he was going to reverse course on trade and not use it as a new rules of road, but actually start to negotiate. But whether or not the Supreme Court says IEPA, which is the justification he has on most of these tariffs are reciprocal. And the fentanyl tariffs is legal or not. They have a slew of legal alternatives that they can use. There are tons of sections, 232s, 302s.

24:22Already they're enacted for other tariffs we have in the United States and other countries. and this administration is already preparing them. So a lot of people are just looking through it because regardless if they're using AIP as a justification or not, they'll just find another way to justify them. It's a bigger check potentially that they are very unpopular and rightly or wrongly, tariffs are associated domestically with making the cost of living, the affordability problem worse. We had a report from the Keele Institute for the World Economy, which was out this week, saying that U.S. consumers had paid 96 % of the tariffs.