Forecasting Greenland

Above the Folds of the Northern Lights

51st State

Discourse around the 51st state has been all over the map for the last 12 months. Puerto Rico and DC were the popular candidates for most of the preceding decade, but early last year, amidst tariff discussions, there was discourse from the White House on Canada becoming our “cherished 51st state.” And for the last few months, despite some buzz around Venezuela, Greenland has become the trendy candidate. Randy Fine (R-FL) has even introduced a bill to this effect. Despite this, the market hasn’t moved much, still expecting that if a 51st state is added to the union, it will probably be DC or PR.

And the odds of statehood for any of these are quite low in the near term, even in light of recent events. While this might seem obvious (there have been no new states since 1959), the process for admitting a state to the union is not actually that arduous. It could be done through an act of Congress and signature by the President. And with the filibuster on life support, the Republican majority could exercise their nuclear option and admit a new state (like Greenland, say), with just 50 votes in the Senate.

If this does happen, it would likely have to happen before the midterms, when Republicans are likely to lose the House and have their edge in the Senate eroded. But statehood is not necessarily the most likely path forward for Greenland.

Designs on Greenland

The President would very much like the US to control Greenland. Whether it be for national security reasons, mineral resources, or power projection in the Western hemisphere, there is now ~30% chance that the US will acquire at least part of the island by the end of Trump’s term in office.

Traders, after taking this effort seriously for the first few months of the Trump administration, became quite skeptical, with the market probability dropping to below 5%. Since the start of the year, specifically around the military intervention in Venezuela, traders have been far more willing to believe the administration’s rhetoric. If this does go through, traders seem to think it will happen soon, with another market on a Greenland acquisition within 2026 implying >2/3 chance that if an acquisition occurs, it will occur this year.

A renewed negotiating effort with Europe, coupled with perhaps an explicit financial offer for the island, have helped convince traders. The odds of a purchase in 2026 remain low, but traders think the price tag would run into the high hundreds of billions, if not over $1 trillion, if a purchase is made.

Ultimately, if Greenland has a sale price at all, that purchase seems more than plausible. Trump, and the United States, likely value the island at around $1 trillion, equivalent to about $17 million per resident of the island country. To whom would this money go? Probably some combination of Denmark, whose Kingdom has partial sovereignty over the territory, the residents of Greenland itself, and perhaps direct investment in the island or its welfare.

But what keeps European politicians and global leaders up at night isn’t the prospect of a tough sale. It’s the prospect of a military incursion.

Ice War

It seems like just yesterday that there was lighthearted banter about the Ice War on Europa.

Now, we contend with the prospects of an actual Ice War. Odds remain quite low of an invasion of the island this year, or even limited strikes, with traders giving less than 10% odds. That being said, 9% is not nothing; if you had asked traders their true probability for this event back in 2024, they would have probably bought as many NO shares as interest rate considerations would allow.

If you expand the market to consider the use of military force in Greenland or the Panama Canal by the end of Trump’s term, a market value of 16% seems to merit taking the prospects of such an event seriously.

Still, conflict over Greenland seems unlikely. A 1-hour special operation would not be sufficient to establish American control over the island, and would risk alienating… well… nearly every American ally? In the meantime, an economic war may have already begun. Trump has promised tariffs beginning at the end of the month to several European nations who have posed obstacles in his acquisition of Greenland, and the market thinks there’s a decent chance these tariffs (which would be reciprocated by Europe) will go into effect, with some odds of a substantial escalation in the future.

Before all this dialogue, there seemed to be a chance that Greenland was reconsidering its relationship with Denmark, and might decide to become independent via referendum. These odds have fallen, in spite of pressure from the US, and I’d guess that the remaining 20% odds reflect the chance of an American acquisition, rather than a grassroots referendum. It’s likely that Greenland residents are feeling rather happy to remain Danish at this time of uncertainty.

Now, US action over Greenland threatens to splinter NATO and draw the West’s military alliances into their least aligned and most unstable era since perhaps before the Cold War. Trump is likely to threaten a US withdrawal from NATO this month, and while odds of an actual withdrawal remain lower, they are far from zero.

Greenland Roundup

Trump himself might visit the island this year, with 20% odds of setting foot on the barren wasteland by July.

He also might declare an interest in Greenland’s less-green and more-icy neighbor, Iceland.

Canada is decently likely to send troops to their Northeastern neighbor within the next month.

And markets think that in a world where Trump uses military force to take Greenland, he might face some political pressure at home, with about 30% conditional odds on his removal from office.

Happy forecasting!

-Above the Fold