Economists are warning that President Donald Trump may be overreaching in his push to buy Greenland after the White House threatened fresh tariffs on several European countries unless they back the U.S. demand to purchase the territory.
Over the weekend, Trump wrote on Truth Social (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.”
Trump argues the U.S. needs the territory—despite it not being for sale—for national security reasons, claiming China and Russia also want influence in the region. He has also asserted that Denmark, which governs Greenland as a self-governing, autonomous part of the kingdom, lacks the capacity to defend it.
But the attempt to pressure allies over territory under another nation’s jurisdiction has landed poorly across the West. While the U.S. remains the world’s largest economy, the latest confrontation comes after months of tensions with partners over tariffs and military spending. Some economists now say the approach risks crossing a line—especially because America’s vulnerability is not purely geopolitical, but financial.
Deutsche Bank strategist Jim Reid pointed to how earlier “Liberation Day” tariffs announced in April were scaled back just a week later after U.S. Treasury yields experienced what he called a “scary” session, as investors moved toward safety and away from American borrowing.
“Financial markets may play a big part in how this situation resolves itself,” Reid wrote in a note to clients this morning. “The main Achilles Heel of the U.S. is the huge twin deficits. So while in many ways it feels like the U.S. holds the economic cards, it doesn’t hold all the funding cards in a world that will be very disturbed by the weekend’s events.”
For years, investors and policymakers have debated when—or whether—a full-blown debt crisis might hit a major advanced economy struggling under heavy deficits. While countries like Japan, the U.K., and France also carry substantial debt loads, America’s $38 trillion deficit stands out by sheer size. Much of that debt is held domestically by the public (including the Fed, where Trump has also faced political friction), but significant portions are held abroad as well—by foreign governments and international investors.
That foreign exposure—about $8 trillion, according to ING—could become a pressure point if Europe decides to highlight how intertwined U.S. financing is with global capital flows. Europe being America’s largest lender “illustrates the deep interdependence between the U.S. and Europe but also shows that, at least theoretically, Europe also has leverage on the U.S.,” wrote Carsten Brzeski, global head of macro, and Bert Colijn, chief economist for the Netherlands. The pair added: “Whether in practice, Europe would really engage in a ‘Sell America Inc’ season is a completely different question. There is very little the EU could do to force European private sector investors to sell USD assets; it could only try to incentivise investments in EUR assets.”
Alternative measures: An ACI
Beyond tariffs, European officials have another option they have so far held back. French President Emmanuel Macron has suggested the moment may be right for the European Union to consider using its Anti-Coercion Instrument (ACI).
The ACI is a set of countermeasures designed for cases where foreign powers are seen as improperly influencing E.U. policy choices. Options can include restricting U.S. companies’ access to European markets, barring them from bidding on government contracts, tightening trade limits, and curtailing foreign investment.
The E.U. could also apply new tariffs to roughly $100 billion worth of imports from the U.S.
Goldman Sachs has suggested these are the kinds of responses European leaders are now weighing. Analysts Sven Jari Stehn and Giovanni Pierdomenico wrote this weekend that the legislation was built for scenarios like this—though likely not with a close ally like the U.S. in mind.
The duo wrote: “Starting the activation does not mean implementation (which requires several steps) but signals potential E.U. action and allows time for negotiation. The ACI could involve a range of policy tools broader than tariffs, such as investment restrictions, taxation of U.S. assets and services.” On services, they noted, the E.U. holds a surplus over the U.S.—meaning retaliation in that sector could hit Washington harder than a simple tariff-for-tariff fight.
