Good morning,
Later today, European heads of state and government will meet in Brussels to discuss the latest round of Greenland invasion threats and tariffs announced this week by US president Trump.
European leaders have so far sounded unified in their abhorrence. But a closer look under the hood shows national capitals are far from aligned on how to respond to Trump's new world order. As our editor Elena Sánchez Nicolás concluded in yesterday’s piece, “Europe is struggling to respond with one voice.”
On a separate track, markets are worrying about where this latest bout of tariff sabre-rattling could lead. Europe is the largest holder of US debt, which some have suggested could be weaponised as leverage. But even if governments could coerce investors into selling trillions in US holdings, Europe itself would likely be first in the firing line.
And there is another risk. Trump’s repeated attacks on the Fed raise the risk that dollar swap lines, which Europe depends on to keep its financial system running, could become politicised and, potentially, subject to the whims of US president Trump.
Late on Wednesday however, the picture change again. After what he described as a “very productive” meeting with Nato secretary general Mark Rutte, Trump said he would pause the tariffs that were due to take effect on 1 February, citing progress toward a future deal on Greenland and the wider Arctic region.
- Wester van Gaal, economy editor
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