President Donald Trump’s White House maintains he didn’t chicken out after demanding the United States take ownership of Greenland from Denmark. That was only ever a negotiating tactic, not an end goal, in their telling.
Whatever the Trump administration’s spin, it was the bond market that forced the president to expedite his way to the negotiating table. It came after a fortnight of forcing the world’s focus on Iranian freedom fighters, who are threatening to oust the 47-year dictatorship by Shia Islamic fundamentalists.
So, Trump renewed an obsession, going back to his first, nonconsecutive term, over acquiring Greenland, an autonomous territory of the Kingdom of Denmark. Trump descended on Davos, where attendees of the World Economic Forum expected the worst. Instead, Trump came to Switzerland ready to make a deal.
After a lengthy speech at the conference in which he promised to take the threat of military force off the table and pledged that “a strong and secure America means a strong NATO,” Trump met with one of his closest European allies, NATO Secretary General Mark Rutte. The pair evidently emerged with, at the very least, in Trump’s words, the “concept of a deal.”
Per preliminary reporting, the framework would grant the U.S. outright ownership of small pockets of land within Greenland, access to the territory’s wealth of rare-earth minerals, previously forbidden by Danish environmental restrictions, and the right to construct Trump’s “Golden Dome” missile defense system. It’s far from finalized, but if secured, it would indeed win the White House everything Trump secretly wanted.
And just in the nick of time. Contrary to the combative cheerleaders who claim that the U.S. has no limit to its ability to steamroll the rest of the West, the exasperated Europeans who had reached the end of their patience were on the cusp of turning Trump’s most bombastic economic excesses against him.
The obvious ticking time bombs were the new onslaught of tariffs that Trump previously threatened “until such time as a Deal is reached for the Complete and Total purchase of Greenland.” If Trump were bluffing in saying he would impose new 10% tariffs on European imports starting in February and 25% tariffs from June, the European Union did not blink. The EU immediately halted finalization of the trade deal Trump negotiated last summer, which brought tariffs on most American imports into the bloc down to zero percent, with the French pushing the EU to trigger its so-called “trade bazooka” and bring cross-Atlantic trade entirely to a halt.
But the real buck, I suspect, stopped with the bond market.
Although Trump had ramped up his rhetoric threatening Greenland with a hostile takeover throughout the month, the general public didn’t begin to panic until his novel tariff threats. Over the long holiday weekend celebrating Martin Luther King Jr. Day, the 10-year Treasury yield skyrocketed some 15 basis points, with the 30-year Treasury yield trending toward the treacherous 5% benchmark.
Unlike “Liberation Day,” which was not a strategic overreach by Trump but rather his original, ill-advised intention, it is understood that the president’s pugnacious posturing around Greenland was always a feint to break down Danish environmental and defense restrictions that would inhibit the U.S. from maximally weaponizing Greenland against the Russians and the Chinese. But for however bold a grand bargain Trump was planning to broker, economic constraints put the art of the deal on a truncated timeline.
Treasury Secretary Scott Bessent attempted to shrug off reports that a Danish pension fund was selling off $100 million of U.S. Treasurys in response to Trump’s escalation. Yet the U.S.’s unrelenting and bipartisan profligacy has rendered our “exorbitant privilege” an actual and absolute necessity.
Nearly $31 trillion of our $38.5 trillion national debt is held by the public. Around 30% of that publicly held debt is owned by foreign investors. All in all, Europeans own more than $2 trillion in U.S. Treasuries, or 20% of the U.S. debt, maturing in the next 12 months and thus have to be refinanced.
WHAT IS EUROPE’S ‘TRADE BAZOOKA’ BEING FLOATED AS AN ANSWER TO TRUMP’S GREENLAND THREATS?
Sure, the nonexistent GDP growth of the European economy would render a mass Treasury sell-off suicidal for them. But it would be perilous for us. Could the U.S. afford a 100 bps rise in the 10-year Treasury yield, which corresponds to more than $100 billion per year in new debt financing? Recall that Trump has waged war and lawfare against the entire Federal Reserve for far less.
Any Greenland deal that obliterates the Europeans’ fruitless environmental restrictions is a win for America and a win for NATO, and the West ought to be united in celebrating the framework of a deal. But the interim exposed the very real fiscal and monetary vulnerabilities of a state as wasteful as ours. And the next time Trump sets up such deals, his team would be wise to remember that the bond market cannot be bullied into submission.
Tiana Lowe Doescher (@TianaTheFirst) is an economics columnist for the Washington Examiner.