Greenland dispute and Canadian pivot to China leave markets calm and growth expectations unchanged

While economic growth remains broadly resilient, recent developments around Greenland, Canada’s recalibrated relationship with China, and heightened volatility in energy and metals markets highlight how geo-economics is becoming a structural feature of the global environment.

Here is Rystad Energy’s market update from Chief Economist, Claudio Galimberti:

“The Greenland episode and Canada’s pivot toward China highlight how trade policy is increasingly being used as a strategic instrument. The gap between stable financial conditions and more turbulent commodity pricing is set to remain a defining feature of the current market environment.”

Greenland is now an unexpected focal point of tension between the United States and Europe. Washington has elevated the island’s strategic importance, citing its military relevance, access to the Arctic, and significant critical mineral and rare-earth potential. In response, European countries including Denmark, France, and Germany have stepped up their military presence through joint Arctic exercises.

President Donald Trump has threatened additional tariffs on Denmark and several other European nations opposing US territorial claims, a move that could raise effective US tariffs on the European Union to as much as 30%. Although no formal policy shift has yet been enacted, the episode has introduced new uncertainty into transatlantic trade relations and reinforced the growing overlap between trade policy and security objectives.

Against this backdrop, Canada has begun to recalibrate its external trade strategy. Prime Minister Mark Carney’s visit to Beijing marked a symbolic thaw in relations at a time of rising friction between the United States and its traditional allies. The agreement reached includes a sharp reduction in tariffs on Chinese electric vehicles entering Canada, alongside significant easing of Chinese retaliatory tariffs on Canadian canola products. While the EV concessions are modest in volume and politically sensitive for Canada’s automotive sector, the agricultural gains offer immediate relief to producers in western provinces. Beyond the near-term impact, the talks reopened channels for broader cooperation, including potential energy exports, as Ottawa reassesses its reliance on the US market amid shifting geopolitical dynamics.

These developments are unfolding against a backdrop of continued macroeconomic resilience, particularly in the United States. Inflation pressures linked to last year’s tariff escalation have faded, with headline and core inflation holding steady at 2.7% and 2.6% year on year in December. Consumer spending has remained robust, supported largely by higher-income households, and financial markets have continued to price a soft-landing scenario. Notably, markets have remained largely indifferent to heightened political and institutional tensions, including the recent confrontation between the US administration and the Federal Reserve, with equity indices reaching new highs and volatility remaining subdued.

In Europe, Germany returned to modest growth in 2025 after two years of contraction, supported by consumption and public spending, while the UK posted a stronger-than-expected rebound in late-year activity. In Asia, China ended the year with a record trade surplus, reflecting its ability to redirect exports toward non-US destinations despite weak domestic demand. Japan, by contrast, faces rising political and financial risks ahead of a potential snap election, as it navigates currency weakness, inflation pressures, and policy normalization by the Bank of Japan.

Commodity markets have become the primary transmission channel for geopolitical risk. Oil prices have been volatile amid developments involving Iran and broader Middle East tensions, while gold and industrial metals have reached new highs as investors seek hedges against geopolitical uncertainty and supply-side risks. Energy and metals markets are increasingly sensitive not only to physical supply and demand, but also to strategic trade measures, sanctions, and security-driven policy decisions.

Overall, financial markets remain optimistic about global growth, supported by resilient earnings and continued investment momentum, including in AI-related sectors. At the same time, the growing prominence of geo-economics suggests that volatility in commodity markets is likely to persist.