US President Donald Trump’s recent posturing over Greenland, which initially rattled European allies and financial markets, appears to be part of a larger strategy involving tariffs, according to analysts. After a brief surge in the S&P 500 and Nasdaq Composite following Trump’s social media post about a “framework” for a deal regarding Greenland and the Arctic region, the initial market exuberance faded. However, the episode reinforced the view that geopolitical events may have limited lasting impact on markets.
BCA Research chief strategist Marko Papic suggests Trump’s Greenland manoeuvre could be linked to an upcoming US Supreme Court ruling on the legality of his tariff policy. He argues that the existing tariffs, which have indirectly taxed consumption, have paradoxically benefited the sharemarket by keeping bond investors less concerned about the US economy overheating. The Supreme Court’s decision, viewed as uncertain, puts Trump in a difficult position, as an adverse ruling would weaken his economic policies and political standing.
Papic theorises that Trump’s interest in Greenland provides a pretext for imposing alternative tariffs on Europe should the Supreme Court overturn his existing tariff policy. This would allow him to maintain leverage over trade partners and influence bond yields and mortgage rates ahead of the midterm elections. Jefferies, a US investment bank, has advised clients to prepare for potential market volatility regardless of the Supreme Court’s decision.
The Supreme Court’s decision on tariffs looms as a significant moment for Trump’s presidency and the financial markets. The outcome could either trigger volatility due to unwinding priced-in relief or force Trump to seek alternative avenues for imposing tariffs, potentially reviving the Greenland issue as a justification.
