Markets are celebrating TACO Tuesday on a Wednesday after US President Donald Trump dropped a threat to impose tariffs on imports from a number of European trading partners, saying that he and NATO Secretary-General Mark Rutte had “framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region”. The dollar is climbing against its peers, while the Swiss franc falls amid a broader surge in risk appetite. Equity markets are rallying and US yields are edging lower.
In a post on his social media platform, the president said: “Based upon a very productive meeting that I have had with the Secretary General of NATO, Mark Rutte, we have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region. This solution, if consummated, will be a great one for the United States of America, and all NATO Nations. Based upon this understanding, I will not be imposing the Tariffs that were scheduled to go into effect on February 1st. Additional discussions are being held concerning The Golden Dome as it pertains to Greenland. Further information will be made available as discussions progress. Vice President JD Vance, Secretary of State Marco Rubio, Special Envoy Steve Witkoff, and various others, as needed, will be responsible for the negotiations – They will report directly to me. Thank you for your attention to this matter!”.
In comments earlier at the World Economic Forum in Davos, Switzerland, Trump said “People thought I would use force. I don’t have to use force. I don’t want to use force. I won’t use force,” but warned he was “seeking immediate negotiations” on the acquisition of Greenland, saying “just as we have acquired many other territories throughout our history”.
Trump’s weekend tariff threats triggered a classic “Sell America” dynamic, with investors reducing exposure to US assets, pressuring the dollar lower, and boosting safe-haven alternatives such as gold and foreign government bonds amid fears of a broader transatlantic trade confrontation. Much like the climbdown in last year’s trade conflict with China, today’s reversal should help stabilise the dollar and ease short-term volatility by removing a major tail risk for markets—but the episode has nonetheless reminded investors of the erratic nature of the current US policy regime, meaning that slow-motion diversification flows could continue for the (un)foreseeable future.