USD Weakens on Trump’s Tariff Threat to Europe Over Greenland

The U.S. dollar declined as President Donald Trump threatened 10% tariffs on European nations supporting Denmark’s sovereignty over Greenland, reigniting concerns over escalating trade tensions. The Bloomberg Dollar Spot Index fell 0.1% in Asia trading, while Treasury futures showed mixed movement amid a U.S. holiday closure. Analysts warn the geopolitical risk is increasing the political risk premium on U.S. assets. David Forrester of Credit Agricole CIB noted the “TACO trade” — using tariff threats as leverage — may ultimately support the dollar, but short-term pressure persists. EUR/USD rose from a two-month low, with the Swiss franc strengthening as haven demand increased. Richard Franulovich of Westpac highlighted renewed de-dollarisation fears, citing the U.S.’s large net international liabilities. Meanwhile, Hikaru Tanaka of Asset Management One sees growing appeal in European bonds as inflation cools and transatlantic tensions rise. Market reactions are expected to remain muted due to tariff fatigue, though long-term risks loom. — With assistance from Tian Chen. [2026-01-19]