Bessent urges Europe not to retaliate against Trump’s Greenland tariffs
The US treasury secretary, Scott Bessent, has urged European countries not to retaliate against the US’s trade tariffs announced over the Greenland crisis,Speaking in Davos during the World Economic Forum, Bessent said countries and companies should pause and “let things play out” after Donald Trump threatened a 25% tariff on a slew of European countries in his pursuit of the autonomous Danish territory,As global stock markets fell amid political uncertainty, Bessent indicated that retaliatory tariffs would be unwise, citing last year’s tit-for-tat tariff war that broke out between the US and China,Last April, Trump’s “liberation day” tariff announcement caused turmoil in global stock markets before some countries agreed trade deals and markets recovered to reach record highs later in the year, fuelled in part by the AI boom,Bessent told a press conference at the annual meeting of global leaders: “I would say this is the same kind of hysteria that we heard on 2 April.
There was a panic.”Bessent said: “What I am urging everyone here to do is sit back, take a deep breath, and let things play out.The worst thing countries can do is escalate against the United States.“What President Trump is threatening on Greenland is very different than the other trade deals.So I would urge all countries to stick with their trade deals.
We have agreed on them, and it does provide great certainty.”Bessent said he did not believe European countries would retaliate against the US over the Greenland crisis by selling their holdings of America’s debt.Bessent claimed that predictions that Europe could stop lending to the US, and dump its holdings of US treasuries, was a “false narrative” that defied logic.Bessent accused the media of having “latched on” to a report from Deutsche Bank on the issue, and of being “hysterical”.“I think it is a completely false narrative.
It defies any logic, and I could not disagree more strongly,” he added.Given the US national debt exceeds $38tn (£28tn), and the country ran a deficit of $1.78tn in 2025, a buyers’ strike would probably push up America’s cost of borrowing, and lower the value of existing debt held by investors around the world.Bessent appeared to be referring to a research note from the Deutsche Bank analyst George Saravelos, who said on Sunday that “Europe owns Greenland, it also owns a lot of treasuries”.Saravelos wrote: “For all its military and economic strength, the US has one key weakness: it relies on others to pay its bills via large external deficits.
“Europe, on the other hand, is America’s largest lender: European countries own $8tn of US bonds and equities, almost twice as much as the rest of the world combined.“In an environment where the geoeconomic stability of the western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part.”US government debt is regarded as a “risk free” holding in the markets, used to price other assets.Bessent predicted that European governments would continue to hold it.Bessent is part of the largest ever US delegation to Davos, with Trump is due to address the meeting on Wednesday.
The EU’s top diplomats met for crisis talks on Sunday and discussed reviving a plan to levy tariffs on €93bn (£81bn) of US goods, which has been suspended since last summer’s trade deal with Trump was agreed.Global stock markets and the US dollar tumbled on Tuesday, while gold and silver prices hit record highs as Trump stepped up his rhetoric over Greenland.In Asia, Japan’s Nikkei fell by 1.1%.The main European stock markets fell by about 1%, with the UK’s FTSE 100 index losing 1.
1%, or 111 points.US stock markets, which were closed for Martin Luther King Day on Monday, are expected to fall sharply when Wall Street opens later on Tuesday.The dollar fell by 0.8% against a basket of leading currencies.However, Trump added further uncertainty to global trade overnight by threatening to impose 200% tariffs on French wines and champagne after France’s Emmanuel Macron was reported to be unwilling to join his “board of peace” on Gaza.
The comments sent shares in owners of French drinks brands falling.The luxury group LVMH – which owns Dom Pérignon, Moët & Chandon and Veuve Clicquot – dropped 2.4% on Tuesday, while Telmont champagne owner Remy Cointreau fell 1.5%.Speaking in Davos, the head of the International Monetary Fund, Kristalina Georgieva, urged world leaders to avoid a new tit-for-tat trade war.
She told CNBC: “We had upgraded projections for this year.One of the factors for the upgrade is that the impact of tariffs was muted, there was no tit-for-tat trade war, and it would be very good if we keep it this way.It would be good for the world economy.It would be good for individual countries.”
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