President Donald Trump gives a speech at the World Economic Forum in Davos, Switzerland, on Wednesday.Chip Somodevilla/Getty Images
Stock markets steadied after U.S. President Donald Trump said he would not use force to take control of Greenland even though he demanded immediate negotiations to buy the island.
“People thought I would use force. I don’t have to use force. I don’t want to use force. I won’t use force,” the President said during a rambling, hour-plus speech at the World Economic Forum in Davos, Switzerland, on Wednesday afternoon.
Previously, Mr. Trump refused to rule out military action to take Greenland, which he sometimes confused with Iceland in his speech. The unspoken threat to use force roiled markets early in the week and plunged the U.S.-European Union trade and military alliance into deep crisis.
In late afternoon European trading on Wednesday, after Mr. Trump stepped off the stage, the FTSE 100 in London was up marginally after losing some ground in the morning. Germany’s Dax index was down slightly. In the U.S., both the Dow and the S&P 500 were up by 0.5 per cent or more.
The bond markets were steady and oil was flat.
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Before Mr. Trump’s Davos speech, gold rose 2 per cent to a new record high, taking the gain to 6 per cent since Monday and to 12 per cent since the start of the year. The metal is typically viewed by investors as a safe haven and rises during times of political tension.
Mr. Trump acknowledged that the transatlantic tensions triggered by his lunge for Greenland, which he called a “big, beautiful piece of ice,” had hit the markets. “Our stock market took the first dip yesterday because of Iceland, so Iceland’s already cost us a lot of money,” he said, referring to Greenland.
But he called the Tuesday market sell-off “peanuts” compared to past rises and that the “stock market is going to be doubled.”
Oil is flat to falling because the energy markets are, at the moment, well supplied by crude. But investors also fear that a renewed transatlantic tariff war could damage economic growth, crimping oil prices.
Oil rose sharply earlier this month, when U.S. Special Forces swooped into Venezuela to abduct former president Nicolás Maduro. The price has retreated in the last week.
In Davos, Fatih Birol, executive director of the International Energy Agency, said that for “at least three-four years, we may well see downward press on oil and gas prices because of the huge amount of supply coming from the U.S. and other countries.”
Mr. Trump has threatened to hit the eight European countries that sent military personnel to Greenland in recent days with 10-per-cent tariffs, rising to 25 per cent by June barring “a complete and total purchase” of the island.
In Davos, U.S. Treasury Secretary Scott Bessent predicted that the EU would not mount a strong retaliation against the tariffs and would instead form one of its “dreaded working groups,” where no decision would be made. But in an interview with the Financial Times, EU Economy Commissioner Valdis Dombrovskis said the EU is ready to fight back fast. “As regard to counter-tariffs, we are able actually to apply them very quickly,” he said.
The day before Mr. Trump’s appearance at Davos, Kenneth Griffin, the billionaire founder of U.S. hedge fund Citadel, was highly critical of the President’s plans to seize Greenland through a purchase or by force. “What I can’t understand is why we are fighting over a piece of rock covered by ice,” he told an audience at Davos. “The U.S. has access to put military bases in Greenland as it sees fit… We don’t need Greenland.”
Marshall Auerback, research associate at the Levy Economics Institute at New York’s Bard College, agreed that the risks of taking Greenland, and potentially shattering the transatlantic alliance as well as NATO, of which Denmark is a founding member, could be catastrophic.
“This is the calm before the storm,” he told The Globe and Mail.
“The problem is that the markets remain in total denial. It’s an understandable psychological reflex because the consequences of what Trump is doing are unimaginably awful and nobody wants to go there. Every assumption that we’ve had for decades is being overturned before our very eyes, but it’s happening almost too quickly for markets to absorb it all.”