Transatlantic trade tensions back on the agenda
In a dramatic escalation of the tensions between Europe and the US, President Donald Trump announced a new set of tariffs on selected countries, directly tied to his controversial push to acquire Greenland. On Saturday January 17, the US president announced on social media that Denmark, Norway, Sweden, France, Germany, the Netherlands, and the UK would be hit with a 10% tariff on February 1, that would rise to 25% on June 1, until a “Deal is reached for the complete and total purchase of Greenland.” The US dollar fell against other major currencies, while gold reached a new all-time high on Sunday January 18 after the news broke.
The announcement of the new tariffs came after those countries sent troops to Greenland last week, allegedly for training purposes and at Denmark’s request. European officials said the deployment was meant to demonstrate their commitment to Arctic as Trump claims that China and Russia pose a threat to Greenland, they insist that the deployment is not intended to defend against a possible US invasion. President Trump has not ruled out the use of military force in his plans for Greenland, while also considering the option of purchasing the island. On Sunday, January 18, the US dollar fell against the Euro, the Japanese Yen among other currencies. Over the last year, the US dollar has weakened significantly against the Euro. Currently, the EUR/USD exchange rate is about 1.16, which is up about 12.86% since January 2025, when the exchange rate was below 1.03. This means that you now need to pay 1.16 USD for one Euro, compared to 1.03 in January 2025. Vontobel offers a wide range of leverage products with the EUR/USD exchange rate as underlying, and you can gain both long and short exposure depending on your view.
In Asian trade on Monday, January 19, precious metals and bonds rallied, stocks were down, and the dollar was lower. The Euro, Yen and Swiss franc were all higher. The EU has threatened to strike back against Trump and has prepared 93 billion Euro in retaliatory tariffs against US exports to the bloc. During emergency talks between EU envoys in Brussels on Sunday night, the French President Emmanuel Macron urged EU member states to activate the so-called “trade bazooka” to restrict US firms’ access to the single market in response to the threats. The official name of this trade defense tool is the Anti-Coercion Instrument, a regulation adopted in 2023. It is designed to deter and respond to economic coercion by a non-EU country, meaning actions that measure to pressure the EU or its member states into making specific political decisions. Countermeasures can include things like retaliatory tariffs, restrictions on market access for foreign companies, limits on foreign investment or trade services, and export controls.
The road ahead
The Greenland tariff dispute comes at a fragile moment for US-European relations and NATO cooperation. What started as President Trump’s assertion of strategic interest in Greenland has now morphed into a major diplomatic crisis. It is not yet certain whether either party will actually follow through on its threats. In the short term, the focus will be on whether Washington will formalize the proposed tariff schedule or leave room for negotiations. Could this lead to the continuation of the downward trajectory of the US dollar that we have seen over the last year?
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Risk with leverage products:
Due to the leverage effect, there is an increased risk of loss (risk of total loss) with leverage products, e.g. Bull & Bear Certificates, Warrants and Mini Futures.
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