Welcome to Greenland, an economy reliant on subsidies and shrimp

The world’s largest island is prized by the U.S. president as the real-estate purchase of a lifetime. It boasts a strategic location and untapped mineral reserves buried deep beneath the ice.

Right now, however, the economy is reliant on something more prosaic: fishing and a recent surge in investment to build new airports. And revenue from both of these is trending down, causing the economy to flatline in 2025.

Opinion polls over recent years consistently show that Greenlanders are more concerned about the state of their economy than a foreign takeover by America, or anyone else.

Greenlandic officials quietly concede that, in the short term at least, anyone running this island is more likely to find themselves staring down a money pit rather than a gold mine.

The island is one of one of the world’s biggest welfare states, a vast expanse of ice-clad villages whose residents—reachable only by helicopter and propjet—are nonetheless accustomed to the perks of Denmark’s social democracy, from free healthcare to robust schools. It could also take years and billions of dollars to transform an economy where 98% of the exports are seafood into a mining behemoth.

“It is not a diversified economy and it is going to take a while for it to become self-sufficient," said Otto Svendsen, a fellow at the Center for Strategic and International Studies. The Greenlandic government hasn’t made “a ton of progress," he said.

Greenland’s population of 57,000 is thinly spread down the coast of some of the world’s most environmentally hostile territory, a country 80% covered with ice. Living standards vary enormously. In the capital, Nuuk, locals can play golf and dine in a fine Thai restaurant. In smaller remote settlements, where wages are on average 50% lower, people bathe by hacking out chunks of ice to melt. The island, which is slightly bigger than Mexico, has less than 100 miles of paved road.

Underpinning this existence is a deep reliance on the Kingdom of Denmark, of which Greenland is a semiautonomous territory. Around 40% of the Greenlandic workforce is employed by the state. Denmark provides a grant that accounts for around half of the Greenlandic government’s revenue and 20% of the island’s GDP. It also pays for police, courts, banking regulators and largely free healthcare for some of the world’s most remote settlements, as well as managing foreign affairs and ponying up for defense.

This equates to just over $1 billion a year, said Torben Andersen, the chairman of the Economic Council for Greenland. If that disappeared overnight, “that would be a dramatic thing," he said.

Were the U.S. to replace that Danish grant, that alone would make the island’s residents the largest per-capita recipients of federal grants, surpassing denizens of Alaska or Washington, D.C.

The Trump administration has offered to buy the island, which the Greenlandic government says isn’t for sale. Administration officials have discussed making payments directly to Greenlanders to win them over.

They are also considering a proposal that would involve Greenland becoming independent from Denmark and receiving U.S. payments to cover some running costs in return for preferential access for the U.S.

A point of comparison is the Marshall Islands, which recently renewed a so-called compact of free association with the U.S. The Pacific islands’ government, which is fully independent of the U.S., receives $115 million a year from Washington in return for granting America authority over defense matters.

That works out at around $2,875 a person a year. To match Denmark’s roughly $1 billion in annual payments to Greenland, the U.S. would have to hand over the equivalent of some $17,500 a person.

Trump has argued that if the U.S. doesn’t take over Greenland, then it could fall into the laps of the Chinese or Russians. Danish officials say China has shown little interest, while Russia—whose military is bogged down in Ukraine—rarely brings naval assets near the island.

The U.S. already maintains a large military-base in northern Greenland rent-free. A decades-old agreement with Denmark gives the U.S. the ability to place more military on Greenland, as long as it notifies Copenhagen first.

“I think we can accommodate both American interest and Greenland’s interests," even though they might differ on several points, Greenland’s business minister, Naaja Nathanielsen, said Tuesday in London. She denied that Greenland wants to tap China for investment, adding that the government wants to partner with “like-minded" nations and gradually become less dependent on Danish subsidies as it becomes more autonomous. “It’s not a sprint, it’s a marathon," she said.

For a decade, the combination of Danish subsidies, infrastructure investment and rising global prices for halibut, cod and shrimp have helped keep the economy ticking over. There has also been a building spree, including a new international airport at Nuuk.

Those good times are coming to an end. Greenland’s economy grew 0.8% in 2024 and 0.2% in 2025, according to the Danish central bank. Part of this slowdown is linked to falling shrimp stocks, as well as declining prices. Rising sea temperatures are affecting shrimp reproduction. Meanwhile, there has been an increase in the population of cod, which eat shrimp.

On a recent trip to Nuuk’s port, fishermen privately grumbled about restrictive fishing quotas and some mused whether Trump couldn’t open some new business opportunities.

Jens Frederiksen, who works at a fishing business in Nuuk running a big shrimp trawler, said there is a divide in opinion between those in the capital and those in other coastal areas.

“On the coast the living standards are way lower, so they might be positive about the U.S. because they can make a positive difference," he said. The U.S. could do to Greenland what happened to Alaska, he said, pointing out how citizens there get paid a dividend from oil revenue invested in a wealth fund. Frederiksen said he would be open to hearing Trump’s offer.

For now, Frederiksen appears to be in the minority. Polls consistently show a majority of Greenlanders don’t want to become part of the U.S. They also might be wary of giving up Denmark’s social-welfare protections for an uncertain future with America.

Earlier this month, the central bank warned of a “surprisingly sharp deterioration" in Greenland’s public finances. Longer term, Greenland faces challenges familiar to many Western economies, including an aging population and a brain drain as educated locals pursue careers in Denmark. This risks exacerbating a labor shortage on the island, which has a workforce of 29,000. There has been a wave of immigration from Asia—the Philippines in particular—to fill vacancies.

“A lack of manpower, a low competence level, an aging population and significant inequality exert pressure on both the economy and social cohesion," the Bank of Greenland, the island’s biggest commercial lender, said in a recent report.

But it also clearly has potential. Much depends on whether Greenland can exploit the mineral wealth under the ice, said Andersen, the economist. Greenland currently has just one active mine. “Many things have been on the table for the last 20 years and they have been dropped because there is not a business case," he said.

Building a mine in Greenland often means also building a road and a port, not to mention housing, clinics and amenities for workers, who are scarce and hard to recruit. The freezing weather can make the mine inaccessible for chunks of the year.

The Greenlandic government owns and has rights over all mineral resources. In 2021, it imposed a moratorium on oil-and-gas exploration licenses. It also banned the exploitation of uranium reserves.

Further investments on the horizon could help boost the economy, including expanding the Buksefjord power plant near Nuuk and building new hydropower plants. These plants could provide cheap energy to attract data centers. There is also a continuing effort to boost tourism, with direct flights to Nuuk from Newark now operating during certain months of the year. Some analysts see Greenland aping Iceland’s success, combining tourism with fishing and cheap energy to attract tech companies.

Faced with the threat of a U.S. takeover, Denmark is also pouring in extra cash. It recently announced a further $250 million in funding over the next three years to cover the cost of a new regional airport in eastern Greenland and a new deep-water port.

Regardless of the economic cost, it is unlikely to deter the Trump administration, said the CSIS’s Svendsen. He concluded that Trump just wants to make America bigger. “It is easy to come to the conclusion that this is about territorial expansion."

Write to Max Colchester at Max.Colchester@wsj.com