U.S. still 'the closest of allies' with the UK despite rift, Finance Minister Reeves says

U.S. still 'the closest of allies' with the UK despite rift, Finance Minister Reeves says

Published Wed, Jan 21 2026

5:57 AM EST

Key Points

• The U.S. remains the "closest of allies" with the U.K., Chancellor Rachel Reeves told CNBC.
• There is a growing rift between the U.S. and Europe over the future of Greenland, a semi-autonomous territory of Denmark.
• The U.S.-Uk trade deal seems safe, for now, but Trump has threatened to increase tariffs on the U.K.

Rachel Reeves, UK Finance Minister, speaking on CNBC's Squawk Box outside the World Economic Forum in Davos, Switzerland on Jan. 22, 2025.

Gerry Miller | CNBC

The U.S. remains the "closest of allies" with the U.K. despite a growing rift between the U.S. and Europe over the future of Greenland, Chancellor Rachel Reeves told CNBC Wednesday.

"It's an incredibly important relationship and always has been, for the U.K., and whether that's about our military and intelligence links, our university and trade links, that continues because it's in our interests that the relationship endures," the finance minister told CNBC's Carolin Roth at the World Economic Forum in Davos, Switzerland.

"We don't want to see an escalation, it's in no one's interests, not in the U.K.'s interests, not in America's interests as well," she added, but "we've been very clear on the issue of Greenland."

The U.K. is having to tread a diplomatic tightrope with the U.S. amid heightened tensions between the world's largest economy and Europe over Danish territory Greenland.

U.S. President Donald Trump has threatened escalating tariffs on the U.K. and seven other European nations, if they continue to oppose his takeover bid of the Arctic island.

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UK's Reeves plays down risk of U.S. tariff shock

U.K. Prime Minister Keir Starmer has tried to use his good rapport with Trump to dissuade the president from pursuing Greenland or imposing fresh tariffs on NATO allies.

He and other European leaders have called for more talks, while continuing to defend the sovereignty of Denmark and Greenland.

However, Trump took aim at the U.K. again on the eve of his appearance at the World Economic Forum in Davos on Wednesday, lambasting London's decision to hand sovereignty of the Chagos Islands to Mauritius.

The islands include Diego Garcia where a joint U.K.-U.S. military base is stationed. The deal, which was agreed in May 2025, saw the British government agree to hand sovereignty to Mauritius, but to lease the military base on Diego Garcia for £101 million ($135.7 million) a year.

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The White House voiced its support for the deal last year but on Tuesday, Trump said it was "an act of great stupidity."

"Shockingly, our "brilliant" NATO Ally, the United Kingdom, is currently planning to give away the Island of Diego Garcia, the site of a vital U.S. Military Base, to Mauritius, and to do so FOR NO REASON WHATSOEVER," Trump posted on social media platform Truth Social early Tuesday.

Uncertainty over Greenland and tariffs has left the "special relationship" looking far more vulnerable, and it's difficult to ascertain where the dispute leaves respective trade deals between the U.K. and EU and the White House, although U.S. Secretary of Commerce Howard Lutnick said Tuesday that there was no need for existing trade deals to come undone.

"We've had this rodeo before," Peter Kyle, U.K. trade secretary, told CNBC Wednesday.

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UK's Trade Sec: Cool heads will prevail despite tariff disruption

"We've been through Liberation Day [when Trump announced global trade tariffs last April], which was quite a moment in global economic terms, and we got through it," he told CNBC's Steve Sedgwick in Davos.

"There is another moment of disruption at the moment, but cool heads will prevail."

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