Economists are warning that President Trump could be overextending his leverage in talks over Greenland, following the Oval Office’s threat of new tariffs on E.U. nations if they refuse to back the U.S. bid to buy the territory.
Over the weekend, President Trump (a site he owns) that “starting on February 1st, 2026, … Denmark, Norway, Sweden, France, Germany, The United Kingdom, The Netherlands, and Finland, will be charged a 10% tariff on any and all goods sent to the United States of America.
“On June 1st, 2026, the tariff will be increased to 25%. This tariff will be due and payable until such time as a deal is reached for the complete and total purchase of Greenland.”
President Trump contends the U.S. must acquire the territory—though it’s not available for sale—for national security purposes, asserting that China and Russia also seek control of the region. He argues that Denmark, whose kingdom includes Greenland as a self-governing, autonomous part, lacks the capacity to defend the land.
Trump’s bid to buy land under another nation’s jurisdiction . Even though the U.S. is the world’s largest economy, its allies’ patience is running out following a year of contentious exchanges over tariffs and military expenditures.
Economists are now cautioning that this weekend’s display of power could be a step too far, and Trump’s vulnerability might lie in America’s excessive spending patterns.
Deutsche Bank’s Jim Reid pointed out that the Liberation Day tariffs in April were rolled back a week later, after U.S. Treasury yields experienced a “scary” session as investors moved to safe assets, .
“Financial markets could be a major factor in how this situation gets resolved,” Reid stated in a client note this morning. “The U.S.’s key Achilles Heel is its massive twin deficits. So while the U.S. seems to hold economic leverage in many ways, it doesn’t control all the funding levers in a world that will be deeply unsettled by the weekend’s developments.”
Investors, analysts, and global leaders have long questioned when—or if—a debt crisis would hit a nation saddled with a huge deficit. While countries like Japan, the U.K., and France are far from balancing their budgets, America’s $38 trillion deficit is vastly larger than those of its peers. While much of that debt is held by the public (including the Fed, where President Trump is also facing scrutiny), large amounts are also owned by foreign governments and international investors.
This exposure—amounting to $8 trillion—, might be something European leaders choose to remind the White House of. As America’s top lender, Europe “highlights the deep interdependence between the U.S. and Europe but also demonstrates that, at least in theory, Europe has leverage over the U.S.,” noted Carsten Brzeski, global head of macro, and Bert Colijn, chief economist for the Netherlands. The pair added: “Whether Europe would actually engage in a ‘Sell America Inc’ campaign in practice is a totally different question. The EU has little ability to force European private sector investors to sell U.S. dollar assets; it could only attempt to encourage investments in euro-denominated assets.”
Alternative measures: An ACI
The EU also has a tool it has not yet used. French President Emmanuel Macron has proposed that now is the moment to deploy the E.U.’s . This tool consists of countermeasures against foreign powers that improperly meddle in the policy decisions of the E.U. or its member states, including , barring them from government contract bids, restricting trade, and limiting foreign investment.
The E.U. could also place new tariffs on approximately from the U.S.
Goldman Sachs thinks this is probably one of the responses European leaders are currently considering. Analysts Sven Jari Stehn and Giovanni Pierdomenico wrote over the weekend that the legislation was created exactly for scenarios like this—though likely not with a close ally such as the U.S. in view.
The pair stated: “Initiating activation doesn’t mean implementation—which requires multiple steps—but signals possible E.U. action and provides time for negotiation. The ACI could include a range of policy tools beyond tariffs, such as investment restrictions, taxation of U.S. assets and services.” Regarding services, the E.U. happens to have a surplus with the U.S., meaning it could cause more damage in this industry than the U.S. could with similar actions.