The new year has opened with a display of boldness in American foreign policy that has not been seen in decades. Whether in Latin America or the Arctic, President Trump is signaling that the era of strategic hesitation is over.
On Saturday, January 17, Trump announced his intention to execute “the Complete and Total purchase of Greenland,” which currently belongs to Denmark.
To get this done, he is applying economic pressure. Trump intends to impose tariffs on various European nations that have opposed the U.S. takeover of Greenland, starting at a 10% rate on February 1. The tariffs escalate to 25% on June 1, 2026 if a deal has not been completed.
The risk of renewed trade disputes contributed to stocks selling off today after the long holiday weekend, with the S&P 500 down around 2%. Gold continued its rally, trading up approximately 2% versus last Friday’s close.
The Greenland dispute explains part of today’s risk-off sentiment, but not all of it. A notable rise in long-term interest rates in Japan, following the announcement of new government stimulus efforts, put upward pressure on long-term Treasury yields. This had a negative impact on stocks as well.
Despite today’s weakness, investors should not lose sight of the highly encouraging macro environment that has been developing, largely driven by productivity gains.
Inflation is coming down, now officially at 2.7% with certain private sector measurements closer to 2%. Meanwhile, the Atlanta Fed is currently forecasting fourth quarter GDP growth above 5%.
The new geopolitical reality
The potential for additional trade friction has led to some market volatility, but over the long-term, U.S. actions to address strategic risks in the Western Hemisphere should be seen as positive.
The capture of Nicolas Maduro in Venezuela and the push to buy Greenland may appear unrelated but reflect a single governing idea. The United States is pursuing geographic advantage at a moment when great power competition is rising.
The U.S. may still be the most powerful country in the world, but, under Trump, it is no longer taking its dominant position for granted. The United States is now acting more assertively to secure its real interests in a world that has become considerably more fragile and contested.
An ascendent China, increasingly aligned with Russia, has methodically reshaped global power dynamics in ways that can no longer be ignored. Alliances and institutions that were built for a different era and different threats are now showing their age.
From the standpoint of long-term U.S. national security interests, western Europe is not what it once was. Demographics and political attitudes have shifted.
Perhaps Denmark is a reliable ally today, but democracies are fluid. Relationships between nations change over time.
Geography, on the other hand, is permanent.
Why Trump wants Greenland
We discussed the strategic significance of Maduro’s removal from power a few weeks ago (Why Markets Celebrated the Fall of Maduro).
The fate of Venezuela matters for many reasons: its close proximity to the United States, its abundance of natural resources (from the world’s largest proven oil reserves to rare earths), its relevance to the immigration problem, and its vulnerability to the meddling of foreign powers.
Greenland presents a different but in many ways similar set of strategic considerations….
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