There are many more European countries in NATO than just Denmark, and all of these will have their trust in the US shattered if the US betrays such a close NATO ally as Denmark. You're literally betraying all your closest and largest allies.
Outside of values, China and Europe have very few conflicting geopolitical goals. Core interests don't clash outside of Europe's conflict with Russia, and some rather minor disagreements in Africa. A Eurasian block with a weak Russia and a stable but balkanized Middle East would be very beneficial to both China and the EU. Even India could be largely integrated into that.
Even if the cost of NATO was higher than its immediate benefit, there is a very real risk of not only losing allies, but making new adversaries.
Admittedly, I don't know how to sunset NATO smoothly, but it ought to be done.