If geopolitics had a thermometer, temperatures would have dropped a few degrees in the past 48 hours. European leaders were angered earlier this week when they once again faced increased tariffs from their trading partner and ally the United States if they did not comply with White House demands to buy Greenland.
a frame Presumably the deal has now been struck Cooperation between the White House and NATO will strengthen U.S. defenses in the Arctic. Details of the deal remain thin, particularly over how much control US forces will gain over NATO territory that is part of the Kingdom of Denmark.
Trump, in turn, lowered his threat to impose new tariffs on many European countries, and the threat of European retaliation has cooled.
While the agreement removes some of the jitters from the negotiations, it does not resolve the stabilizing differences between the United States and partners it once considered allies.
That’s according to Macquarie global strategists Thierry Weitzman and Gareth Berry. In the note sent to the customer wealthThe two wrote that there was a “mutual alienation” between American and European counterparts. “It is in this spirit that we can still talk about a broken and more dangerous world in which the United States becomes less boastful, the dollar loses its reserve currency status, and the United States turns to the Western Hemisphere as its only defensible bastion,” the pair explained.
As the second Trump administration charts a course, friction is growing between the United States and Europe, both the EU and the UK. Issues include Europe’s contribution to NATO and Trump’s tariff regime.
“Even in yesterday’s Greenland deal, there are elements of mutual distrust,” Weitzman and Berry wrote. “For example, an agreement to cede part of Greenland to the United States may only be achieved if the United States continues to support (very reluctantly) the European view that Ukraine should fully ‘remain in Europe’ – that is, not under Russian control.”
This European demand could therefore put the United States on a collision course with Putin, thereby motivating the United States to strengthen its defenses against Russia by acquiring Greenland. Meanwhile, Europe maintains a friendly attitude towards America’s rival China, President Macron said he “welcomes” its investment.
“This threat to the United States, informed by European demands and actions, fueled U.S. hostility (and military threats) toward Europe, particularly with regard to Greenland’s ‘needs’ and America’s desire for European civilized ‘manliness,'” the report said.
Threats to the US Dollar
Interestingly, there appear to be suggestions that Europe might react to U.S. actions by investing away from U.S. assets Most controlled by the Trump administration. U.S. Treasury Secretary Scott Bessent responded to (and dismissed) suggestions that European buyers of U.S. debt may be exiting the bond market, but some evidence can be seen in this week’s rise in yields. The sell-off subsequently subsided as relations between the two sides of the Atlantic normalized.
This is America’s “Achilles Heel”, Deutsche Bank This week said: The country’s annual budget deficit is sizable and the national debt is growing as a result. It requires foreign financing of that debt. This raises a question about the long-term economic strength of the United States.
Macquarie wrote in a Global Outlook memo in December that overall, the actions of the Trump 2.0 administration have created a perception that the United States is an increasingly unstable partner. The Liberation Day tariffs created a “watershed” moment as investors began to look for assets outside the White House’s sphere of influence and away from the dollar.
The team wrote last year that the incident would cast a “long shadow” on trust in the U.S. dollar, and that the weaponization of U.S. economic power “injects greater urgency into the search for alternative currencies as a store of value or means of exchange.”
Trump’s latest about-face has done little to quell concerns that the United States is no longer the financial haven it once was. As Macquarie strategists wrote in a new report, “If you want to retain the dollar’s reserve currency status, the current situation is not a good place to be. That status is predicated on U.S. leadership and protection in exchange for a modicum of obedience (and financing) from U.S. allies and others joining the U.S.-led rules-based order.”
“Without this recognition, diversification away from the U.S. dollar will eventually dominate, even if it is initially into gold.”