Greenland's future still unclear as Europe mulls shift away from US

(Sharecast News) - The future of Greenland remained uncertain on Thursday, even after US President Donald Trump ruled out the use of military force to annexe the island and U-turned on his threat of tariffs against those who oppose him. Global share markets rallied on the news, but there was scepticism that Trump's "framework deal" contained much in the way of substance, particularly when he was unable to provide details when pressed in an interview.

Hours after his rambling speech to the World Economic Forum in Davos - which contained several wild inaccuracies and several mistaken references to Iceland - Trump announced "the framework of a future deal with respect to Greenland" and pulled his threat to levy tariffs against eight European countries.

Traders were swift to note the return of the "Taco" trade, a reference to the "Trump Always Chickens Out" phrase coined when he pulled back on many of his punitive tariff policies last year.

Financial markets slumped this week as Trump's language became more bellicose. One Danish pension fund dumped $100m in US treasuries and a Deutsche Bank analysis suggested this could become more widespread.

"By now we have grown accustomed to Trump's strategy of threatening nations with tariffs in a bid to get what he wants, but this occasion appears to have taken it a step too far. For many of the European leaders, this is a warning sign that their US partners are no longer reliable for as long as Trump is in power," said Scope Markets analyst Joshua Mahony.

"After-all, what stops him coming back with another threat next month because he wants another deal. Perversely, while the US continues to beat up their friends, the nation's best protected from Trump's wrath appear to be those already sanctioned (Russia) and those with sufficient leverage to fight back (China)."

Nato secretary-general Mark Rutte, who held talks with Trump on Wednesday on his plans for a missile defence shield, insisted there was still "a lot of work to be done" on any agreement.

He told Fox News the subject of whether Greenland would remain a part of Denmark under the deal, had not come up but a a Nato spokesperson later said Rutte did suggest a compromise on sovereignty with the president.

The US already has access to the semi-autonomous territory and has the option to widen it by building bases and carrying out military activities under the terms of existing long-standing agreements.

Scope's Mahony said the repercussions of Trump's constant threats and attacks on European nations meant there would be a "greater desire for self-sufficiency and a gradual weakening in the interconnectedness seen with the US over the years", with China one of the main benefactors of the shift.

He cited a recent trade deal between Beijing and Canada as an example of countries trying to "reduce exposure to their unreliable partners in the West".

"For one thing, the events of this week will have undoubtedly brought fresh clarity over the need to do more in Europe, although ongoing debt sustainability concerns mean that any additional spending could bring higher borrowing costs and higher valuations for precious metals."

Reporting by Frank Prenesti for Sharecast.com