Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
The US Treasury secretary has dismissed the EU’s ability to quickly agree a forceful response to Donald Trump’s Greenland-related tariffs, predicting the bloc would likely form “the dreaded European working group” rather than take rapid action.
Scott Bessent suggested the 27-strong group of nations’ slow decision-making would hamper its ability to put together a potent reaction or quickly wield the so-called anti-coercion instrument, its strongest trade measure.
“I imagine they will form the dreaded European working group first, which seems to be their most forceful weapon,” Bessent told a small group of reporters in Davos, Switzerland, where he is attending the World Economic Forum.
Trump’s threat to impose 10 per cent tariffs on European states as he tries to “acquire” Greenland has raised the spectre of a trade war with the continent, plunging the transatlantic relationship into crisis.
But Bessent’s remarks suggest Washington is not seriously weighing the prospect of the EU deploying its most potent trade weapon, which would allow the bloc to restrict access to the single market for US companies.
On Tuesday morning, the US president posted on his Truth Social platform that he had held a “very good” telephone call with Nato secretary-general Mark Rutte about Greenland, adding that he had agreed to a meeting of “various parties” at the World Economic Forum in Davos.
“Greenland is imperative for National and World security. There can be no going back,” he wrote.
He also posted screenshots of text messages apparently from Emmanuel Macron, in which the French president said, “I do not understand what you are doing on Greenland,” and suggested convening a G7 meeting at Davos.
On Tuesday global bonds sold off, the dollar weakened and gold hit a new high above $4,700 a troy ounce for the first time.
The yield on 30-year US Treasury bonds rose 0.04 percentage points to 4.88 per cent, the highest level since early September. The yield on the 10-year bond gained 0.03 percentage points to 4.26 per cent.
Yields on long-dated Japanese debt hit a record high and rose for the US while the dollar slipped 0.5 per cent against a basket of its key trading partners.
Bessent cited Europe’s continuing purchases of Russian fuel, saying “their speed of decision-making isn’t always the fastest”. The EU is aiming to phase out these imports from Russia by the end of 2027 after sharply reducing purchases.
Earlier on Monday, the Treasury secretary warned the EU it would be “unwise” to hit back at Trump. The bloc is readying retaliatory tariffs on €93bn worth of US exports, which would likely come before any use of the anti-coercion instrument.
The president is due in Davos on Wednesday, as European capitals debate their response.
The Treasury secretary said a decision on the next chair of the US Federal Reserve was unlikely to come as soon as Trump’s visit to the Swiss resort.
“I think next week,” Bessent said, suggesting the administration plans to make an announcement by the end of January.
Bessent brushed aside the prospect that a renewed trade conflict between the US and EU would undermine efforts to ease the cost of living for Americans. “Tariffs were the dog that didn’t bark in terms of price increases,” he said, citing subdued core goods inflation.
“As someone who was a professor of economic history at Yale I can tell you the [countries with a trade surplus] always get hit the worst in a trade war.”
He added sales of US government bonds by European holders would be “self-defeating”, amid market speculation that this could form part of Europe’s possible retaliation.
Recommended
European countries including the UK are hoping Trump can be pulled back from his threat to impose 10 per cent tariffs from February 1, which the president has said would stay in force until a deal is reached for the “purchase of Greenland”.
Asked if the US was open to a negotiated solution that fell short of taking control of Greenland, Bessent said: “I would just take President Trump at his word for now.”
Some investors have been diversifying away from US assets because of the policy volatility in Washington, among them bond group Pimco. Responding to these moves, Bessent said US Treasuries had performed strongly last year.
“I can’t speak to what they [Pimco] are saying but . . . the US actually had a fiscal contraction last year, as opposed to France which can’t seem to get a budget,” he said.