Transatlantic Fracture: EU Readies ‘Trade Rocket Launcher’ as Trump’s Greenland Ultimatum Looms

The geopolitical risk premium in Forex markets has spiked as a diplomatic row over Greenland transforms into a full-scale trade war threat. President Donald Trump, doubling down on his ambition to acquire the Arctic territory, has issued an ultimatum to European allies: facilitate the transfer or face 10% tariffs beginning in February.

This unprecedented linkage of territorial ambition with trade policy has triggered a sharp response from Brussels.

Europe's “Rocket Launcher”

European Commission President Ursula von der Leyen, speaking from Davos, condemned the move as a breach of trust, signaling that the EU is prepared to activate its “Anti-Coercion Instrument” (ACI)—dubbed the “trade rocket launcher” by diplomats.

Unlike previous trade disputes, the ACI allows the EU to impose immediate, punitive countermeasures without unanimous member state approval, potentially targeting:

• US intellectual property rights.
• Access to EU public procurement markets.
• Specific tariffs on politically sensitive US exports (e.g., bourbon, precision machinery).

French President Emmanuel Macron warned that the bloc “would not hesitate” to use the tool, describing the US position as “bullying.”

Forex Implications: EUR/USD Volatility

The EUR/USD pair has become the primary gauge for this conflict. While the Euro initially dipped on growth fears, it has staged a technical rebound as markets price in a “de-dollarization” risk.

• Reports indicate Danish pension funds have begun liquidating US Treasury holdings.
• European institutional capital may rotate out of USD assets.
• Deutsche Bank warns of risks to the $8 trillion transatlantic capital market.
• This trend weighs on the Dollar Index (DXY) despite the Fed's hawkish stance.