USD Buckles Under Geopolitical Strain: Trump's Greenland Ultimatum Sparks Trade War Fears

The Greenback faced meaningful selling pressure for a second consecutive session on Tuesday, with the Dollar Index (DXY) slipping to near 98.50, as foreign exchange markets repriced the risk of a full-scale transatlantic trade conflict. Sentiment is dominated by President Donald Trump's renewed aggressive stance regarding Greenland sovereignty and diplomatic friction.

• Current Level: 98.50
• Initial Action: 10% tariff effective February 1
• Escalation Risk: 25% rate by June 1
• Retaliation Target: €93 billion ($108 billion)

Diplomacy by Tariff

The catalyst for the dollar's weakness lies in the White House's latest ultimatum. President Trump has threatened to impose a 10% tariff on eight European nations—including France, Germany, and the UK—effective February 1, if an agreement to purchase Greenland is not reached.

Further compounding tensions, a threat of a 200% levy on French wine and champagne was issued following President Emmanuel Macron's refusal to join a US-led “Peace Committee.”

EU Readies Counter-Measures

In Brussels, European Commission President Ursula von der Leyen has urged the bloc to become independent. The EU has reportedly prepared a retaliatory list targeting €93 billion ($108 billion) in US goods.

Furthermore, Morgan Stanley warns of a “tail risk” where the EU activates its “Anti-Coercion Instrument,” potentially targeting US service sectors and weighing on US equity futures.

Technical Outlook

• Support: 98.30–98.42 (Fibonacci confluence)
• Resistance: 98.70
• Downside Target: 97.75
• Key Event: World Economic Forum in Davos