Executive Summary

President Donald Trump’s unprecedented demand that European nations sell Greenland to the United States, backed by escalating tariffs, represents more than a territorial dispute. For Singapore, this crisis signals profound shifts in global security architecture, trade relationships, and the rules-based international order that the city-state has long relied upon. As NATO allies face their most serious internal crisis in decades, the ripple effects are already reaching Southeast Asia’s most trade-dependent economy.

The Unfolding Crisis

On January 17, 2026, President Trump announced 10% tariffs on eight European countries, set to begin February 1 and rise to 25% by June 1, unless an agreement is reached for the United States to purchase Greenland. The targeted nations—Denmark, Finland, France, Germany, Norway, Sweden, the Netherlands, and the United Kingdom—represent some of America’s closest NATO allies and collectively account for significant portions of global trade.

Treasury Secretary Scott Bessent’s defense of the policy has been stark and uncompromising. In his words, Europeans project weakness while the United States projects strength, and European leaders will eventually understand they need the American security umbrella. This rhetoric marks a dramatic departure from seven decades of transatlantic partnership.

The European response has been unified and defiant. French President Emmanuel Macron called the tariffs unacceptable, while Swedish Prime Minister Ulf Kristersson declared his country would not be blackmailed. Most tellingly, all eight targeted countries issued a joint statement warning that the tariff threats undermine transatlantic relations and risk a dangerous downward spiral.

Direct Economic Impact on Singapore

EU Trade Relations at Risk

Singapore’s economic relationship with the European Union is substantial and carefully cultivated. In 2024, bilateral trade in goods reached €48 billion, with the EU ranking as Singapore’s 21st largest merchandise trading partner globally. More significantly, when services are included, total EU-Singapore trade reached €132.7 billion in 2023, making the EU Singapore’s largest trade partner in ASEAN and 10th largest globally.

The EU-Singapore Free Trade Agreement, which entered into force in November 2019, eliminated all tariffs between the two sides and has driven steady growth in bilateral flows. Singapore ranks as the EU’s fifth largest partner for trade in services, with two-way services trade exceeding €80 billion annually. The recently signed Digital Trade Agreement in May 2025 was meant to further deepen this relationship.

If the current crisis leads to broader economic fragmentation or protectionist measures, Singapore’s carefully constructed trade architecture faces serious threats. The eight countries facing Trump’s tariffs account for the bulk of Singapore’s EU trade relationships. Any retaliatory measures, supply chain disruptions, or general deterioration in global trade confidence would directly impact Singapore’s position as a regional hub.

Investment Flows Under Pressure

Beyond trade, investment relationships hang in the balance. The EU holds €293 billion in foreign direct investment stocks in Singapore as of 2022, making it the sixth largest global source of FDI for the city-state. Conversely, Singapore is the eighth largest source of FDI stocks in the EU, with €206 billion invested as of 2022.

These investment flows underpin Singapore’s role as a financial hub and gateway to Southeast Asia. European companies use Singapore as their regional headquarters, while Singaporean firms leverage EU markets for expansion. Economic uncertainty and fractured transatlantic relationships could prompt companies to reconsider these arrangements, potentially relocating operations to markets perceived as more stable.

The US Dimension

Singapore’s relationship with the United States adds another layer of complexity. US goods and services trade with Singapore totaled approximately $146 billion in 2024, supported by the US-Singapore Free Trade Agreement that has been in force since 2004. The United States maintains a trade surplus with Singapore in both goods and services, which theoretically should protect Singapore from direct tariff targeting.

However, Singapore’s Foreign Minister Dr. Vivian Balakrishnan acknowledged in February 2025 that even without direct tariffs, Singapore’s vulnerability lies in its deep integration into global supply chains. With trade constituting more than three times GDP, any friction in the international trading system impacts Singapore indirectly but severely.

The Trump administration’s willingness to weaponize tariffs against close allies for geopolitical objectives beyond trade creates precedent that could eventually affect any country, regardless of trade balances or formal agreements.

Security Architecture Implications

NATO’s Existential Crisis

The Greenland dispute threatens NATO’s viability as a collective security organization. European leaders have warned that any US attempt to take Greenland by force could spell the end of the alliance after 75 years. While Trump’s shift to economic coercion rather than military threats might seem like de-escalation, the damage to alliance cohesion may already be irreversible.

For Singapore, NATO’s stability has indirect but meaningful implications. The alliance has historically anchored security in Europe, allowing the United States to maintain its forward presence in Asia. If NATO weakens or dissolves, America may either withdraw from global security commitments entirely or become even more unpredictable in its remaining engagements.

Singapore is not a US treaty ally but maintains one of America’s strongest security partnerships in the Indo-Pacific. Under the 2005 Strategic Framework Agreement, Singapore was recognized as a Major Security Cooperation Partner. The 1990 Memorandum of Understanding, extended in 2019 for another 15 years, provides the United States use of facilities in Singapore, including deployment of littoral combat ships to Changi Naval Base.

If the United States proves willing to abandon or coerce NATO allies over territorial ambitions, what does this signal about the reliability of non-treaty security partnerships? Singapore’s defense planning assumes American presence in the region provides stability. That assumption now requires careful reconsideration.

Regional Power Dynamics

The crisis plays directly into Beijing’s narrative about Western decline and the instability of US-led alliances. As EU foreign policy chief Kaja Kallas noted, China and Russia must be having a field day watching NATO allies threaten each other with tariffs.

For Singapore, which has carefully balanced relationships with both the United States and China, this creates acute diplomatic challenges. Singapore has consistently advocated for strong US engagement in Asia while maintaining productive ties with Beijing. The city-state has warned against forcing countries to choose sides, arguing this approach would be counterproductive.

The Greenland crisis demonstrates that great power competition is entering a more chaotic phase where traditional alliance structures offer limited protection. Singapore has been part of NATO’s Tailored Cooperation Program as a global partner, attending the Shangri-La Dialogue and other regional forums where NATO officials engage with Indo-Pacific counterparts. As NATO’s credibility erodes, these engagement mechanisms lose value.

Moreover, Singapore has long opposed the creation of a NATO-like alliance in Asia, with former Prime Minister Lee Hsien Loong explicitly stating in 2022 that Asian circumstances differ from Europe’s and such military blocs would be unnecessary and undesirable. The current NATO crisis validates this position while also highlighting the risks of relying on Western security architecture.

The Rules-Based Order Under Assault

Legal Foundations Crumbling

The Trump administration’s use of the International Emergency Economic Powers Act to impose tariffs for territorial acquisition represents a fundamental challenge to international law. The act grants the president broad powers during “unusual and extraordinary threats,” but using it to coerce allies into selling sovereign territory stretches any reasonable interpretation beyond recognition.

The US Supreme Court is expected to rule in coming weeks on whether Trump can legally use emergency powers to impose tariffs. Regardless of the decision, the damage to legal predictability has already occurred. If emergency powers can be invoked for any reason a president deems important, including territorial expansion, then international economic law becomes meaningless.

For Singapore, which has built its prosperity on being a reliable node in rules-based global trade networks, this erosion of legal foundations is existential. The city-state has concluded at least 19 bilateral and multilateral free trade agreements precisely because it depends on rules rather than power to secure its interests. If major powers can simply invoke emergency provisions to override treaty commitments, Singapore’s entire trade architecture rests on quicksand.

Prime Minister Lawrence Wong told parliament in April 2025 that Trump’s initial tariff announcement marked “a profound turning point” and warned Singapore was entering “a new phase in global affairs—one that is more arbitrary, protectionist and dangerous.” The Greenland crisis confirms this assessment with brutal clarity.

Precedent for Might Makes Right

The crisis establishes dangerous precedent that territorial ambitions can be pursued through economic coercion against allies. Trump’s rhetoric about China and Russia wanting Greenland, and only America being able to “play in this game,” reveals a worldview where great powers pursue spheres of influence over smaller states’ wishes.

This philosophy directly threatens Singapore’s fundamental interests. In a “might makes right” international order, small states become bargaining chips in great power competitions. Singapore has consistently advocated for sovereignty and territorial integrity as foundational principles, knowing that without these norms, the city-state’s independence becomes negotiable.

The willingness of the United States to publicly demand territory from a close ally, threaten escalating tariffs to achieve compliance, and dismiss European sovereignty concerns all signal that traditional diplomatic norms no longer constrain American behavior. If Denmark can be treated this way despite 75 years of alliance with Washington, no small state can assume its sovereignty is secure.

Economic Diversification Pressures

ASEAN and Asian Integration

The Greenland crisis accelerates Singapore’s existing efforts to deepen economic integration within ASEAN and broader Asia. While Singapore was already expanding trade relationships beyond traditional Western partners, the unreliability of transatlantic trade now makes this diversification urgent rather than merely prudent.

ASEAN remains central to Singapore’s economic strategy. The United States is ASEAN’s second largest trading partner and largest source of foreign direct investment into the region. However, American willingness to weaponize trade relationships for political objectives suggests ASEAN countries must reduce their collective dependence on US markets.

Singapore has been actively developing alternative partnerships. The Pacific Alliance-Singapore Free Trade Agreement entered into force in May 2025, expanding access to Latin American markets including Chile and Peru. The Regional Comprehensive Economic Partnership, while including the United States, provides framework for deeper intra-Asian trade that doesn’t rely on Washington’s goodwill.

China looms as both opportunity and risk in this equation. While deepening economic ties with China offers alternatives to Western markets, Singapore must avoid simply replacing dependence on one major power with dependence on another. The city-state’s strategy has always been to remain valuable to all sides rather than becoming captured by any single partner.

Financial Hub Vulnerabilities

Singapore’s role as a global financial center depends critically on stability and predictability. International banks, asset managers, and corporate treasuries use Singapore as their Asian base precisely because the city-state offers rule of law, policy consistency, and neutral ground between competing powers.

The Greenland crisis threatens all three pillars. If the United States is willing to disrupt alliances and impose arbitrary sanctions for territorial goals, financial institutions must consider whether assets denominated in dollars or routed through American systems remain secure. This could accelerate de-dollarization efforts already underway as countries seek to reduce exposure to American financial hegemony.

For Singapore, positioned between the dollar system and emerging Chinese financial infrastructure, the crisis creates both challenges and opportunities. The city-state could potentially benefit as a safe haven if both Western and Chinese financial systems appear unreliable. However, this requires maintaining credibility as neutral ground even as pressure mounts to choose sides.

The larger risk is that fragmented global finance reduces overall trade and investment flows, which would hurt Singapore regardless of its positioning. A world where US-aligned and China-aligned financial systems operate separately, with limited integration, would be far less efficient and prosperous than the current globally integrated system.

Strategic Responses for Singapore

Diplomatic Recalibration

Singapore must navigate the current crisis without alienating either the United States or Europe while also managing relationships with China and other Asian partners. This requires acknowledging the changing international order while avoiding taking explicit sides in disputes between major powers.

The city-state should continue emphasizing multilateralism and rules-based systems while accepting these frameworks no longer command the authority they once did. Singapore can position itself as a convener of dialogue between competing power centers rather than a mere participant in one camp or another.

Foreign Minister Balakrishnan’s measured response to questions about tariffs—noting that Singapore doesn’t expect to be on direct hit lists but acknowledging indirect impacts—demonstrates appropriate caution. Singapore should maintain this posture of careful observation while accelerating practical preparations for a more fragmented world.

Defense Sovereignty

The reliability of security partnerships with the United States requires reassessment without abandoning these relationships entirely. Singapore should continue maintaining close defense ties with Washington while also diversifying security cooperation with other partners including France, Australia, Japan, and India.

Investment in indigenous defense capabilities becomes more important when external security guarantees appear less certain. Singapore already maintains one of the most capable militaries in Southeast Asia relative to its size. The current crisis suggests this investment remains essential and potentially requires acceleration.

The city-state should also deepen participation in regional security mechanisms including the Five Power Defence Arrangements with Malaysia, Australia, New Zealand, and the United Kingdom. While these arrangements offer less capability than US partnership, they provide alternatives if American commitments prove unreliable.

Economic Resilience

Singapore needs to accelerate efforts to make its economy more resilient to great power conflicts and trade fragmentation. This includes diversifying trade partners, developing stronger domestic capabilities in critical sectors, and ensuring supply chain security.

The government should work with businesses to reduce dependence on any single market or supply chain route. Companies using Singapore as a hub should be encouraged to develop contingency plans for scenarios where US-Europe trade flows are disrupted or where Chinese relationships with Western countries deteriorate further.

Strategic stockpiling of essential goods, redundant supply chains, and domestic production capacity in critical sectors all become more important in a fragmented world. Singapore’s small size and lack of natural resources make complete self-sufficiency impossible, but targeted investments can reduce vulnerabilities.

Technology and Innovation

In an era where technology increasingly determines economic and military power, Singapore must ensure it remains at the forefront of critical capabilities. The US-Singapore Dialogue on Critical and Emerging Technology, launched in 2023, focuses on artificial intelligence, digital economy, data governance, biotechnology, and quantum computing.

While maintaining these partnerships with the United States, Singapore should also develop independent technological capabilities and relationships with other technology leaders including Europe, Japan, South Korea, and Taiwan. The goal is to avoid dependence on any single country for critical technologies.

Singapore’s emphasis on becoming a smart nation and digital hub serves this objective. Investments in education, research and development, and attracting global talent all contribute to ensuring the city-state remains competitive regardless of how international technology supply chains fragment.

Broader Implications for Small States

Sovereignty Under Pressure

The Greenland crisis demonstrates that small state sovereignty cannot be taken for granted even within alliance systems and even when protected by international law. If the United States is willing to demand territory from Denmark, a NATO ally with which it has no territorial dispute, then sovereignty becomes contingent rather than absolute.

For small states globally, this creates an environment of heightened insecurity. The Cold War era, despite its tensions, offered relatively stable rules where territorial sovereignty was generally respected among allied nations. The post-Cold War era briefly seemed to offer even stronger protections through international institutions and norms.

The current moment reveals these protections as more fragile than they appeared. Small states must prepare for a world where might matters more than right, where alliance commitments prove conditional, and where great powers pursue spheres of influence at smaller nations’ expense.

Coalition Building

Small states cannot individually resist great power pressure, but collective action offers better prospects. Singapore should strengthen cooperation with like-minded small and medium states that share interest in preserving international rules and norms.

Within ASEAN, Singapore can advocate for collective positions on sovereignty and non-interference while acknowledging the diversity of perspectives within the grouping. Beyond ASEAN, partnerships with states like Switzerland, Nordic countries, and other small advanced economies can amplify voices calling for rules-based order.

The challenge is that these coalitions lack coercive power to enforce norms when major powers violate them. Their value lies primarily in diplomatic weight and moral authority, which matter less in a might-makes-right world. Nevertheless, building these networks provides options and leverage that isolated small states lack.

Conclusion: Preparing for Sustained Turbulence

The Greenland crisis is not an isolated incident but rather a symptom of deeper transformations in international order. The post-World War II system based on American leadership, Atlantic alliance, and rules-based institutions is giving way to something far less certain.

For Singapore, the implications span economic, security, and diplomatic dimensions. Trade relationships carefully built over decades face disruption. Security partnerships reveal their contingent nature. International law and norms prove less protective than hoped.

The city-state’s response must balance multiple imperatives: maintaining productive relationships with all major powers, diversifying economic and security partnerships, building indigenous resilience, and advocating for rules and norms while accepting their diminished authority.

Singapore has successfully navigated previous periods of international turbulence through pragmatism, careful diplomacy, and strategic positioning. The current era demands these same qualities while acknowledging that the margin for error has narrowed significantly.

The world is entering a more dangerous phase where small states cannot assume their sovereignty is secure, where trade relationships serve geopolitical rather than economic logic, where alliances prove unreliable, and where power matters more than rules. Singapore must prepare for sustained turbulence while working to preserve whatever elements of the rules-based order remain salvageable.

The Greenland crisis serves as a stark warning. The rules that protected Singapore’s prosperity and security are eroding faster than many hoped. The city-state’s challenge is to adapt to this harsher reality while maintaining the values and principles that define its identity. It is a test Singapore did not seek but cannot avoid—and one that will define the nation’s trajectory for years to come.