- Last Saturday, Trump increased the pressure on European countries that defend the sovereignty of the Kingdom of Denmark over the autonomous territory of Greenland. The official objective of the Trump administration is to acquire this territory in order to strengthen the national security of the United States. Following the deployment of European military personnel to Greenland, it is difficult to imagine Trump directly confronting the American army; he therefore announced an additional 10% in customs duties on Scandinavian countries, France, Germany, the United Kingdom and the Netherlands, applicable as of next month and raised to 25% in June if no progress is made on the Greenland issue. Trump is once again applying the methods described in The Art of the Deal. The United States still benefits from strong economic and financial indicators despite, for example, the implementation of its protectionist trade policy. Customs duties are thus being used as a foreign policy tool against its NATO allies. Some European countries see this as a form of coercion and are advocating for a commercial response. However, since these countries already gave in on this issue last summer, Trump is once again exploiting this weakness.
- In response to this new economic standoff, financial markets have been reacting consistently since last Friday. Long-term rates are rising slightly (+4.29% for the US 10‑year, +7 bps; 2.88% for the German 10‑year, +6 bps compared to Friday), reflecting only a limited integration of the inflationary risk linked to customs duties. The stocks most exposed to transatlantic trade are falling more sharply (LVMH -7%, Hermès -6%, Porsche -5%, Airbus -5%). The S&P 500 dropped as much as -1.6%. Finally, the EUR/USD exchange rate appreciated by about 1.5%, signaling distrust toward the dollar zone since Friday.
- Trump is therefore likely initiating a new negotiation with European countries, the outcome of which will be more or less favorable to the United States and probably unfavorable to Europe: increased customs revenue for the federal government, a European financial contribution to the defense of the American continent from Greenland, and resource‑exploitation conditions in Greenland that benefit the United States. Trump is using American power to consolidate what he calls the Western Hemisphere. In the short term, the real counterweights to his administration remain sovereign interest rates and the stock market ; two key elements for household purchasing power, the main issue in the midterms.
Market Flash – Customs duties to consolidate the western hemisphere of the United States
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