Economists have warned that President Trump may be pushing too hard in Greenland negotiations after the Oval Office threatened to impose new tariffs on EU countries if they do not support U.S. demands to buy Greenland.
Over the weekend, President Trump Posted on Truth Social (A website he owns) states, “Beginning February 1, 2026,…Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland will impose a 10% tariff on all goods shipped to the United States.
“On June 1, 2026, the tariff will increase to 25%. The tariff will expire and be paid until an agreement is reached to purchase Greenland outright.”
President Trump believes that the United States needs to buy the territory (not sell it) for national security reasons and claims that China and Russia also want to control the area. He believes that Greenland is an autonomous part of the Kingdom of Denmark and Denmark is unable to defend this land.
Trump demands to buy land governed by other countries was not welcomed by the Western world. Although the United States may have the largest economy on earth, the patience of its allies is wearing thin after a year of bitter spats over tariffs and military spending.
Economists are now warning that the elasticity of power this weekend may be too much and that Trump’s weakness may prove to be America’s greedy spending habits.
Deutsche Bank’s Jim Reid highlighted the “terrible” trading in U.S. Treasury yields as investors retreated to safety, a week after April’s Liberation Day tariffs were lifted, Stay away from US lending.
“Financial markets are likely to play an important role in the resolution of this situation,” Reid wrote in a note to clients this morning. “The main Achilles heel of the United States is its huge twin deficits. So, while in many ways the United States appears to hold the economic cards, it does not hold all the financial cards in the world, and the events of the weekend will make the world very uneasy.”
Investors, analysts and world leaders have long wondered when or if a debt crisis would hit the country, which is saddled with huge deficits. While countries such as Japan, the United Kingdom and France have not balanced their books at all, the United States’ $38 trillion deficit dwarfs that of other countries. While most of the debt is held by the public (including the Federal Reserve, where President Trump is also in trouble), foreign governments and overseas investors also own large amounts of debt.
This risk exposure amounts to US$8 trillion——ING pointed outmay be something European leaders decide to remind the White House of. Global macro chief Carsten Brzeski and Netherlands chief economist Bert Colijn wrote that Europe’s emergence as the United States’ largest lender “illustrates the deep interdependence between the United States and Europe, but also shows that, at least in theory, Europe also has influence over the United States.” The pair added: “Whether Europe will actually enter ‘sell US companies’ season is an entirely different question. The EU can do little to force European private sector investors to sell dollar assets; it can only try to incentivize investment in euro assets.”
Alternative measures: ACI
The EU also has one weapons in its arsenal It has not been deployed yet. French President Macron said now is the time to harness the power of the European Union. Anti-Coercion Tool (ACI). This tool is a set of countermeasures against any foreign power that inappropriately interferes with the policy choices of the EU or its member states, through Restricting U.S. companies’ access to European marketsprohibiting them from bidding for government jobs, restricting trade, and restricting foreign investment.
The EU may also US$100 billion in imports from the united states
Goldman Sachs believes that this may be one of the responses that European leaders are currently considering. Analysts Sven Jari Stehn and Giovanni Pierdomenico wrote this weekend that the legislation is designed for exactly this scenario, although perhaps not with powerful allies like the United States in mind.
“Initiating activation does not imply implementation (which requires several steps), but rather signals possible actions by the EU and allows time for negotiations. ACI is likely to involve a broader set of policy instruments than tariffs, such as investment restrictions, taxes on US assets and services,” the pair wrote. When it comes to services, the EU runs a surplus with the US, which means the EU will cause more damage to this particular sector than similar actions across the Atlantic.