Dollar Heavy in Response to Trump's Greenland Tariffs

Official White House Photo by Daniel Torok

The threat of significant tariffs brings a whiff of the Sell America trade.

The dollar is softer across the board Monday following weekend news that U.S. President Donald Trump will impose tariffs on European countries for their unwillingness to let him buy Greenland.

The President said he would start with a 10% levy on EU and UK imports on February 01, before ratcheting the levy to 25% by June.

In response, global equity markets are lower, as is the dollar index, which is a measure of broader dollar performance.

The pound to dollar exchange rate dropped in initial Asian trade but has since recovered and is now higher on the day at 1.3397. Euro-Dollar is 0.30% higher at 1.1629.

Price action is reminiscent of the 'Sell America' trade of 2025, where markets judged that Trump's action on tariffs and wider policy actions were detrimental for the U.S. economy, and its broader standing as the global hegemon.

"We do not view the tariff news as fundamentally positive driver for the greenback. Additional escalation is likely to prove USD-negative over time. We therefore continue to prefer buying EUR/USD on dips," says Kristoffer Kjær Lomholt, Co-Head of FI and FX Research at Danske Bank.

Above: The dollar index - a measure of broad USD performance.

With the EU and UK almost certainly unlikely to change their position on Denmark's ownership of Greenland, Trump will find tariffs won't work as a negotiating ploy for the simple fact that there's nothing to negotiate.

It is meanwhile reported Monday the EU is in talks to potentially impose tariffs on €93BN of U.S. good imports if President Donald Trump follows through on his threat to hit European countries with tariffs.

The EU is also suspending the implementation of the already-agreed EU-U.S. trade deal that was reached last year.

The market's reaction to the weekend tariff news could nevertheless prove limited, probably because the market sees a risk the U.S. Supreme Court will imminently rule Trump's wielding of tariff powers is unconstitutional.

"So far, the market reaction has been negative but modest, likely due to expectations that the tariffs may be ruled illegal by the Supreme Court within the coming weeks," says Danske Bank in a morning market briefing.

The court will decide whether U.S. tariffs that have been implemented under the IEEPA authority have met the required thresholds that would allow the President to act in the manner he has, or whether he has overreached. 

At the time of writing, prediction markets put a roughly 70% likelihood on the Supreme Court ruling against Trump's tariffs.