EU-US Trade Clash & Greenland Calm: Markets Rebound Amid Rising Risk

The unfolding Greenland episode has introduced substantial policy and market risk, especially given its implications for trade frameworks, strategic alliances (including NATO), and sovereign debt stability.

President Trump’s declarative move—rejecting military force but aggressively pressing for purchase and levying threats of escalating tariffs—partially reversed the worst outcomes for markets, but did not eliminate broader geopolitical concerns. While equities rallied and yields retreated slightly, the structural uncertainty—about U.S. strategy, EU response, and the durability of trade agreements—remains elevated.

From the perspective of European actors, the Greenland plan is treated not as negotiation but coercion. The EU Parliament’s suspension of the U.S.–EU trade deal reflects a legal and political boundary being drawn around national sovereignty. Activation of the EU’s anti-coercion instrument and potential counter-tariffs targeting $90–€110 billion of U.S. goods raise the specter of a broader and more sustained U.S.–EU trade conflict.

On fixed income and currency markets, the spike in Treasury yields (10-year yield near 4.29%) underscores both increased risk premia and potential for foreign capital outflows, especially if European and other sovereign investors scale back holdings of U.S. assets in response to policy unpredictability. Gold’s surge above historic levels signals heightened safe-haven demand in pursuit of downside protection.

Corporate fundamentals remain crucial. Strong earnings from United Airlines and Halliburton gave markets something to lean on, while Netflix’s metrics (e.g. decelerating viewing hours and subscriber growth) prompted multiple downward target revisions. Berkshire Hathaway’s move to exit its ~28% stake in Kraft Heinz signals strategic reallocation and may contribute to downside pressure in consumer packaged goods.

Strategically, companies with meaningful exposure to EU markets or supply chains—industrials, autos, energy—must assess tariff risks, disruption potential and the implications for investment and sourcing decisions. U.S. exporters could lose preferential access or face retaliatory restrictions under looming EU countermeasures.

Open questions include whether genuine purchase negotiations of Greenland are feasible politically and legally, how far the EU will escalate in its response, whether European investors will materially reduce their holdings of U.S. assets, and how this geopolitical tension could shift U.S. domestic policy around trade and defense commitments.