Trump’s Greenland Bully Act Collapses Under Davos Spotlights
World leaders returned to Davos as markets swung and geopolitical assumptions cracked, with Donald Trump’s retreats reinforcing calls for non-alignment and middle-power realism in a more fractured global order.
The Gist
The World Economic Forum this year highlighted significant geopolitical shifts, particularly involving U.S. President Trump.
- Trump renounced threats to forcibly acquire Greenland and impose tariffs on Europe.
- Canadian PM Mark Carney advocated for middle powers to embrace 'value-based realism' and non-alignment.
- Carney's strategy includes forming issue-based coalitions while maintaining global engagement, contrasting with Trump's approach.
The World Economic Forum regained its focal interest this year, as it served as the forum for the unveiling of major geopolitical moves that moved markets and currencies, and removed the blinkers of leaders who have trained since early youth to see the emperor’s clothes, even when he had none on.
American president Donald Trump backed down on two threats that had roiled markets around the world: to take Greenland using force if necessary, and to levy new tariffs on European countries that resisted his move to take over Greenland. In the course of a rambling speech at Davos, the US president disavowed both threats and claimed to have struck a framework deal on Greenland, whose contents remain a mystery to those who are not Donald Trump.
By chickening out on taking over Greenland by force and on levying punitive tariffs on those who oppose American takeover of Greenland, Trump underlined — involuntarily, of course — the validity of Canadian prime minister Mark Carney’s message to middle powers, delivered to much acclaim at Davos.
Non-Alignment The Way To Go?
Middle powers, such as Canada, said Carney, must stop pretending that the old world order continues to operate, accept the reality of rupture and prepare to defend their sovereignty and welfare in the face of big powers seeking to use their size to gain unfair advantage at the expense of other nations. “Value-based realism” is the term Carney used to describe his new strategy.
In practice, this means building strength internally, rejecting the option of walling out the rest of the world and seeking out issue-based coalitions of countries willing to join hands on particular issues, such as cooperation being extended without any fond hope that on another issue, erstwhile partners would not find themselves as adversaries.
Carney did not say this in so many words, but the strategy he outlined is essentially the idea of non-alignment or multi-alignment that has been the cornerstone of India’s foreign policy since Independence.
Canada was also not prepared to abandon globalisation, and sought to act as a bridge between the Trans-Pacific Partnership and the European Union. This adds momentum to the opinion that India should join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the name for the Trans-Pacific economic partnership deal that the Obama administration had originally championed.
The TPT was negotiated without China’s participation and contained strong protection for intellectual property rights. The goal was to present China with a trading bloc that China stood to gain from joining but could join only if it abandoned freeloading practices with regard to someone else’s IPR. Trump abandon TPT, and it survived on the strength of support from Japan, Australia, Canada and several Latin American nations. Britain has joined the CPTPT. Europe, as it tries to find its feet after the rupture with the US, could join the bloc as well.
Is Trump Okay?
Prior to travelling to Davos, President Trump sent a text message to the prime minister of Norway, saying that since the Norwegians refused to give Trump the Nobel Prize for Peace, Trump no longer feels obliged to act in a peaceful fashion, and that the US could well use force to take over the Danish protectorate of Greenland. (Unlike other Nobel prizes, which are decided in Sweden, the Peace prize is decided by a committee appointed by Norway’s Parliament, and the prize is awarded in Norway).
Some commentators have read into this message not just Trump’s peevish pettiness but also an alarming infirmity of mind that could progressively cripple his presidency. Trump’s mental and physical well-being is worth keeping an eye on.
New Town Projects
In India, all attention is now focused on the 2026 Budget that would be presented on Sunday, 1 February. The finance minister faces tough policy choices. Should she persist with expanding capital expenditure to boost investment and growth in the economy? Or should she focus on tightening fiscal discipline, in order to keep the deficit and debt under control, so as to allow more room for the private sector to access India’s stagnant savings and boost growth? Many experts urge prioritising fiscal discipline.
The reality is that private investment has not picked up. Capacity utilisation in manufacturing is stuck below 75%. There is little reason for the private sector to invest in additional capacity, particularly in the background of anaemic sales growth. The only place the private sector can invest freely is in infrastructure.
India faces continuing demand for office space and talent for new global capability centres. These GCCs add to rent inflation and traffic congestion in India’s existing big cities. India can do with a few thousand additional sq km of urban space. India can, in other words, make do with a few brand new towns, deploying recent concepts in town planning, energy efficiency, integrated, multi-modal efficiency of mobility, hyper connectedness to the rest of the world via optical fibre, fast roads, rail track and an international airport, and a university that is as much focused on new knowledge creation as on teaching.
The Budget would find it useful to offer reasonably large seed capital to fund new town projects in states that take the lead in creating the needed zoning, planning, land acquisition and ancillary infrastructure building a new town would call for. The Union government should finalise the policy framework for public-private partnership in different sectors of the infrastructure, alongside.
Growth Needs Groundwork
Growth falters. It would make sense to present a Budget that is at least 15% of GDP in size, whatever the size of the fiscal deficit.
India needs a vibrant market for corporate debt if private investment is to take off. Creation of such a market has to begin with freeing up the market for government debt, and bringing it fully under the ambit of the markets regulator, Sebi, with the central bank letting go of its control over the operations of the market for government bonds. A full range of derivative instruments must be created to enable bond investors hedge against risks of exchange rate variation, interest rate variation and repayment default. The debt market must have space for sub-prime paper, to facilitate the emergence of non-banking finance companies that lend to small companies at transparent, reasonable rates.
A functional bond market is what the private sector needs to invest in infrastructure, apart from policy support with regard to permits, clearances, and access to unencumbered land. The pooling of farmers’ land to build the new town of Amaravati in Andhra Pradesh is proof that it is possible to release land for new projects, if the owners of land are converted into stakeholders.
Growth must be forged on the ground, not conjured up in statistics. PPP in infrastructure is a way to realise such growth.
