Left field
After this weekend, markets have been left questioning whether the White House’s pursuit of Greenland remains noise or has become a material risk. Certainly, the threat of escalating tariffs once again until a deal is achieved in the United States’ favour escalates economic risk once again. Trump’s social media foreign policy over the weekend declared that eight nations would be subject to a 10% additional tariff if the sovereignty of Greenland is not offered conditionally or otherwise to the US. Those nations are: the UK, France, Germany, Norway, Sweden, Denmark, Finland, and the Netherlands.
The President claimed this new tariff level would be imposed as soon as February 1st and would rise to an additional 25% on June 1st if a deal is not reached. There are a whole host of reasons why that threat may never materialise and it is likely those reasons are behind why the price reaction so far in exposed assets has been limited. It is also clear this morning that the Martin Luther King bank holiday in the US yesterday had some role in muting the market reaction.
There are additional reasons why the market is partially calling Trump’s bluff, including the fact that POTUS’ chosen tariff mechanism, the IEEPA, is under review by the Supreme Court. The court will offer its verdict around the same time as the 10% surplus would be due to be imposed. This challenges the fundamental ability of the White House to impose such an agenda. However, there is clearly an outcome in which current market pricing discounts the risk of this US administration’s ambitions for Greenland. France’s Emanuel Macron in particular, in reaction to the weekend’s threats, has been vocal about his support for using the EU’s so-far unopened anti-coercion toolkit. As we have witnessed overnight, that has brought Champagne into the firing line with a proposed 200% tariff.
Discussion and Analysis by Charles Porter
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