Davos Showdown: Trump’s "Greenland Gambit" Rattles Markets as Trade War Fear Returns

Global markets are navigating a renewed geopolitical minefield as the World Economic Forum in Davos opens under the shadow of American President Donald Trumps aggressive diplomatic maneuvers. In a move that has stunned European allies, Trump has threatened to impose a 10% tariff on eight European nations—escalating to 25% by June 2026—unless they acquiesce to his long-standing ambition to purchase Greenland.

The Tariff Sword and Diplomatic “Softening”

The standoff involves key NATO allies, including Denmark, France, and Germany. While the threat initiated a risk-off wave across global assets, with Bitcoin shedding 6% and equities wobbling, signs of a pivot emerged late Tuesday. Trump appeared to soften his stance, hinting to reporters that a deal making NATO “very happy” might be imminent.

“We will reach a solution that makes NATO very happy and us very happy,” Trump stated, suggesting that the tariff threat may be a classic negotiation tactic designed to force a strategic compromise rather than ignite a full-blown trade war.

Treasury Secretary Dismisses “Debt Weaponization”

A critical subplot to this diplomatic row is the financial retaliation threatened by European institutions. Reports surfaced that Danish pension funds were liquidating US Treasury holdings in protest. However, US Treasury Secretary Scott Bessent moved quickly to calm nerves, dismissing these actions as “irrelevant” to the deep liquidity of the US bond market.

“They have been selling US debt for years; I am not worried at all,” Bessent remarked, attempting to sever the link between the geopolitical dispute and US fiscal stability. Despite his confidence, the market remains on edge, watching for any structural shifts in foreign demand for US debt.

Market Data Snapshot

• Tariffs: 10% initial threat, rising to 25% by June 2026.
• Crypto: Bitcoin drops 6% amid risk-off sentiment.
• Forex: EUR/USD holding psychological 1.1700 level.

Technicals

• Price Action: EUR/USD resilient above 1.1700, reaching intra-day highs of 1.1767.
• Key Support: 1.1640 – a break below could signal confirmed trade war pricing.
• Key Resistance: 1.1800 – requires political de-escalation to breach.
• Drivers: ECB stability contrasted with cooling US labor data (ADP miss).