Trump’s Greenland Tariff Threat Exposes America’s Debt Weakness, Deutsche Bank Warns
Economists are cautioning that President Donald Trump may be pushing negotiations too far over Greenland, after the White House warned of new tariffs on European Union nations if they failed to support America’s bid to buy the territory.
Deutsche Bank cautions that President Trump’s Greenland tariff threat could backfire, exposing the U.S.’s massive debt and financial vulnerabilities amid rising tensions with Europe.
Over the weekend, Trump announced on Truth Social, the platform he owns, that beginning February 1, 2026, Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland would face a 10% tariff on all goods exported to the United States.
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He added that the levy would rise to 25% on June 1, 2026, and would remain in force until a deal was struck for what he described as the “complete and total purchase of Greenland.”
Trump has argued that the U.S. needs to acquire Greenland for national security reasons, claiming China and Russia also seek influence over the region. He maintains that Denmark, of which Greenland is a self-governing and autonomous part, lacks the capacity to defend the territory.
The proposal to buy land under another nation’s jurisdiction has not been well received across the Western world. While the U.S. remains the world’s largest economy, patience among its allies has been thinning after a year of tense exchanges over tariffs and defense spending.
Economists now warn that this latest show of force could be a step too far, with America’s heavy spending habits emerging as a potential weak point.
Jim Reid of Deutsche Bank pointed out that so-called Liberation Day tariffs introduced in April were reversed just a week later, after U.S. Treasury yields experienced what he described as a “scary” session as investors sought safety away from American debt.
“Financial markets may play a big part in how this situation resolves itself,” Reid wrote in a client note. “The main Achilles heel of the U.S. is the huge twin deficits. So while it may feel 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.”
Investors, analysts, and global leaders have long questioned when—or if—a debt crisis might hit countries burdened by large deficits. Although nations such as Japan, the U.K., and France are far from balancing their budgets, America’s $38 trillion deficit overshadows its peers. Much of that debt is held by the public, including the Federal Reserve—where Trump is also facing pressure—but large portions are also owned by foreign governments and international investors.
ING noted that roughly $8 trillion of this exposure could be something European leaders might remind Washington about. Europe being the U.S.’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, ING’s global head of macro, and Bert Colijn, its chief economist for the Netherlands. They added that whether Europe would actually engage in a “Sell America Inc” phase is another matter entirely, since the EU has little power to force private investors to dump U.S. assets and could only try to encourage investment in euro-denominated ones.
The EU also has another option it has yet to activate. French President Emmanuel Macron has suggested it may be time to use the bloc’s Anti-Coercion Instrument (ACI). This framework allows countermeasures against foreign powers that interfere with EU or member-state policy decisions, including restricting U.S. companies’ access to European markets, banning them from government contracts, limiting trade, and curbing foreign investment.
In addition, the EU could impose fresh tariffs on about $100 billion worth of imports from the United States.
Goldman Sachs believes this is one of the responses European leaders are now considering. Analysts Sven Jari Stehn and Giovanni Pierdomenico wrote that the legislation was designed precisely for situations like this, though likely not with a close ally such as the U.S. in mind.
They noted that beginning the activation process would not mean immediate implementation, since several steps are required, but it would signal potential EU action and allow time for negotiations. The ACI could cover a broad set of tools beyond tariffs, including investment limits and taxes on U.S. assets and services. On services, the EU holds a surplus over the U.S., meaning any retaliation in this area would hurt America more than similar steps taken across the Atlantic.
