Why Does Trump Want Greenland? The Economics below the Ice

Greenland might not seem like a typical focus for the United States, yet it became a surprising headline when former President Donald Trump floated the idea of purchasing the vast Arctic territory. While the suggestion was met with confusion and even humor at first, the underlying reasoning has significant economic and geopolitical foundations. For high school economics students, Greenland offers an intriguing case study of resource economics, geopolitical strategy, and how nations weigh opportunity costs in major decisions.

A Resource-Rich Opportunity

At its core, one of the primary motivations for acquiring Greenland is its vast untapped wealth of natural resources. Greenland is home to significant reserves of rare earth minerals, oil, and natural gas. Rare earth minerals, in particular, are essential for manufacturing modern technologies like smartphones, electric vehicles, and wind turbines. Currently, China dominates the global supply of these minerals, giving it immense economic and political leverage over countries reliant on them.

By controlling Greenland’s resources, the United States could reduce its dependence on imports from China, addressing a classic economic challenge: reducing supply-side dependency. This concept is a form of economic risk management—diversifying sources of critical inputs to minimize vulnerabilities in supply chains. If the U.S. secures access to these resources, it could strengthen its strategic economic position in industries vital to the future global economy.

However, extracting these resources is not straightforward. Greenland’s harsh climate, limited infrastructure, and environmental concerns mean that mining and drilling would require significant upfront investment. This is where the principle of cost-benefit analysis becomes crucial. Would the potential economic gains from these resources outweigh the costs of extraction and the environmental damage caused?

The Geopolitical Advantage

Beyond economics, Greenland’s location makes it a valuable geopolitical asset. Sitting in the Arctic, the island is strategically positioned between North America, Europe, and Asia. As climate change accelerates the melting of Arctic ice, new shipping routes are becoming viable, reducing travel distances for international trade. Control over Greenland would provide the U.S. with significant influence over these routes, potentially boosting its role in global trade and geopolitics.

Greenland also plays a key role in national security. The U.S. already operates the Thule Air Base in Greenland, which is crucial for monitoring missile activity and space surveillance. Acquiring the island would further secure this asset and counter increasing activity in the Arctic by Russia and China. This ties into the economic concept of public goods. National security is a public good—it benefits all citizens and isn’t diminished by individual use. Investing in Greenland would effectively increase the U.S.’s ability to provide this public good on a global scale.

Can Greenland Be Bought?

While the economic and strategic rationale may be strong, the practicalities of such a purchase are complex. Greenland is an autonomous territory under Danish sovereignty, and its leaders, along with the people of Greenland, have categorically rejected the idea of selling the island. This brings in the principle of sovereignty—the right of a nation or territory to govern itself. No matter how lucrative the deal might appear, it cannot proceed without the consent of Greenland’s people.

In the past, large territorial acquisitions like the purchase of Alaska in 1867 ($7.2 million) were seen as strategic bargains. But times have changed. Today, such a purchase would require not just a financial offer but also political and diplomatic negotiations that respect Greenland’s autonomy and Denmark’s sovereignty. Any move perceived as undermining these principles would create significant international backlash, further complicating the potential deal.

How Might It Happen?

If the outright purchase of Greenland is off the table, the United States might pursue other avenues. Economic investments could be one option. By funding infrastructure projects or resource development in Greenland, the U.S. could build stronger ties with the territory and increase its economic influence without directly owning the land. This would be an example of foreign direct investment (FDI), where one country invests in another to gain economic benefits and strategic leverage.

Another possibility is increasing military and scientific cooperation. For example, expanding the U.S. presence at Thule Air Base or collaborating on Arctic research could deepen the relationship with Greenland while addressing key U.S. strategic interests. These approaches align with the principle of incrementalism, where small, gradual steps are taken to achieve larger goals over time.

However, reports indicate that President Trump has considered more coercive methods. In a phone conversation with Danish Prime Minister Mette Frederiksen, Trump suggested imposing tariffs on Danish goods if Denmark refused to discuss the sale of Greenland. This tactic aligns with the concept of economic coercion, where a country uses trade barriers or sanctions to pressure another nation into compliance. Such measures could strain diplomatic relations and potentially lead to a trade dispute, especially considering Denmark’s significant economic ties with the United States.

Trump’s suggestion to impose tariffs on Danish goods to pressure Denmark into discussing the sale of Greenland reflects the principle of economic coercion. This is when a country uses economic tools like sanctions, tariffs, or restrictions to force another nation to act in a desired way. While economic coercion can sometimes be effective, it comes with significant risks, particularly in damaging diplomatic relationships and sparking trade wars.

For example, Denmark is part of the European Union, and any aggressive economic moves against it could trigger retaliation not just from Denmark, but from the EU as a whole. This raises questions about the opportunity cost of such a strategy. Would the potential benefits of acquiring Greenland outweigh the broader economic and diplomatic costs of alienating key allies?

Another avenue, though unlikely, would involve the U.S. leveraging its military presence in Greenland to increase influence over the territory. While this would be considered a highly controversial and extreme move, it’s worth noting that geopolitical tensions in the Arctic have been escalating due to competition from countries like Russia and China. Increased military pressure or presence could be seen as a form of game theory, where the U.S. and its rivals are locked in strategic decisions based on anticipating the actions of the other players. However, such a move would likely breach international law and spark global condemnation.

Ultimately, Trump’s rhetoric reflects his negotiating style, which often combines bold offers with underlying threats. Whether it’s economic investment, coercion, or diplomatic pressure, the strategies considered for Greenland highlight the interplay between economics, strategy, and international relations.

The Economic Principles at Play

From an educational perspective, this situation is packed with lessons in economics:

1. Supply-Side Dependency: Reducing reliance on one country (e.g., China for rare earth minerals) to avoid economic vulnerability.
2. Cost-Benefit Analysis: Evaluating whether the benefits of acquiring Greenland (resources, strategic advantages) outweigh the financial, environmental, and diplomatic costs.
3. Public Goods: Strengthening national security, a good that benefits all citizens and can be provided without being consumed individually.
4. Sovereignty: Recognizing the economic and political right of Greenland to self-determination.
5. Foreign Direct Investment (FDI): Using strategic economic investments to gain influence in foreign territories.
6. Economic Coercion: Employing tariffs or trade restrictions to pressure another country into action, with high risks of retaliation.
7. Game Theory: The U.S. must anticipate the responses of other global powers when

The proposal to buy Greenland might seem unusual at first glance, but it brings forward important discussions about the intersection of economics and geopolitics. From natural resource management to strategic positioning, the idea is a window into how nations make major decisions based on economic principles and political realities. For high school economics students, it’s an opportunity to see theoretical concepts like cost-benefit analysis and supply-side dependency applied on a global scale.

While the likelihood of Greenland becoming a U.S. territory is slim, the situation serves as a fascinating case study of how economic motivations drive international relations, even in the unlikeliest scenarios.