Banks split on USD impact from Trump Greenland tariff threat, diverge on sell America risk

Diverging bank views on tariff risks and the US dollar. Dollar risks from Trump’s Greenland tariff threats hinge on escalation, with banks split between growth resilience and sentiment fragility.

Summary:

• Banks split on how tariff threats affect the US dollar

• SocGen sees fears of foreign US asset selling as overstated

• MUFG warns of renewed “sell America” sentiment

• Both see risks as modest without major escalation

• Focus is on sentiment shifts, not crisis dynamics

Two major banks are taking different angles on the same political risk: President Donald Trump’s threat to impose tariffs on parts of Europe if the US fails to secure an agreement to acquire Greenland. While both see risks as contained for now, they diverge on how sensitive the US dollar may be to shifting investor sentiment.

At Societe Generale, strategist Kit Juckes argues fears of a large foreign exodus from US assets are overdone. In his view, while European public-sector investors could slow purchases or even sell US assets in response to political pressure, it would take a far more serious escalation before institutions are willing to compromise portfolio performance for political signalling. Juckes also stresses that the dollar is already cheaper than a year ago and that US growth prospects are materially stronger than they were immediately after the sweeping tariffs announced last April. From this perspective, the dollar retains a fundamental buffer even if rhetoric around tariffs intensifies.

MUFG, however, is more cautious on sentiment. FX strategist Derek Halpenny warns that tariff threats tied to Greenland could revive a broader “sell America” narrative, encouraging investors to further reduce dollar exposure at the margin. While MUFG does not foresee a disorderly move, it argues that political unpredictability itself can weigh on the currency by nudging global investors to diversify away from the US, particularly if trade tensions with Europe deepen.

Importantly, both banks converge on a key point: scale matters. Neither expects aggressive dollar selling unless tensions escalate into a sustained US–Europe trade confrontation. In that sense, the debate is less about direction and more about degree. Societe Generale focuses on relative growth and institutional inertia supporting the dollar, while MUFG emphasises the cumulative impact of policy uncertainty on positioning.

For markets, the takeaway is a familiar one: absent a major escalation, dollar moves linked to the Greenland tariff saga are likely to be incremental rather than dramatic, with sentiment oscillating between growth support and political risk.