New York
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President Donald Trump’s clash with European leaders over Greenland prompted investors to sell US assets — but the market backlash might not yet be enough to force a rethink.
Investors this week revived the “Sell America” trade, dumping US stocks, bonds and the dollar. Stocks on Tuesday suffered their worst day since October and the dollar had its worst day since August.
Stocks rebounded on Wednesday after Trump said he would not use “excessive strength and force” to acquire Greenland, though the president maintained his insistence on acquiring the Danish territory. The Dow was up 430 points, or 0.89%. The S&P 500 rose 1%. The tech-heavy Nasdaq rose 1.2%. The S&P 500 is less than 2% away from a record high.
“All we’re asking for is to get Greenland, including right title and ownership, because you need the ownership to defend it,” Trump said. “You can’t defend it on a lease.”
While few things can seemingly change Trump’s mind, a negative market reaction is one of them. However, some analysts say the confrontation with Europe might not deliver a big enough shock to markets to prompt him to change course.
The key indicator will be the bond market.
The “Sell America” trade hearkens back to the spring, when Trump’s unveiling of his so-called “Liberation Day” tariffs rocked global financial markets and investors sold simultaneously sold stocks, bonds and the dollar on a more dramatic scale.
Treasury yields, which rise when bonds fall, spiked higher in April in a manner so aggressive and abnormal that the Trump administration decided to pause most of its planned tariffs for 90 days. Bond investors were getting “yippy,” Trump said. Turmoil in the bond market — which influences borrowing costs across the US economy — prompted the president to walk back his most severe tariff threats.
“The latest triple sell-off in US equities, Treasuries and the dollar would probably have to become much larger before the ‘guardrails’ of the financial markets prompted Donald Trump to change his plans for Greenland,” John Higgins, chief markets economist at Capital Economics, said in a note.
“The US government bond market, in particular, might have to come under a lot more pressure, like it did after ‘Liberation Day’, to prompt the president to back down,” Higgins said.
Ten-year and 30-year Treasury yields set interest rates across the US economy. When investors sell Treasuries, yields rise, lifting borrowing costs for the US government, businesses and consumers.
A revolt in the bond market — on the scale seen in early April — is likely one flash point that could force the Trump administration to back down on its Greenland and tariff threats. A sustained sell-off could send yields soaring higher, becoming a thorn in the government’s side and raising borrowing costs.
Treasury yields on Tuesday hit their highest level since September. But unless the Treasury market experiences stress that pushes yields sharply higher, the president may continue to press forward with his aggressive foreign and economic policy, analysts say.
“The only thing stronger and more intimidating than Trump is the US bond market,” Neil Wilson, strategist at UK trading platform Saxo Markets, said in a note. “The bond market is perhaps that only thing that will stop Trump going all the way on Greenland.”
A surge in Japanese government bond yields on Tuesday also put pressure on Treasuries. Yields climbed but have not nearly displayed the level of panic seen after “Liberation Day.”
Meanwhile, Treasuries remain appealing for many investors. The US Treasury market just delivered its best returns in five years. While that could raise concerns of an impending economic slowdown (as investors rush into safe bonds), US economic growth exceeded expectations in 2025.
The stock market response has been more contained than April in part because investors are more aware of the impact of tariffs and there is skepticism that Trump would actually go through with a serious attempt to take over Greenland. “Trump Always Chickens Out,” or TACO, has become a common refrain on Wall Street.
Investors might be betting that Trump will back off when necessary to boost the markets, so they hold their breath, and their stocks. But that mitigates the intensity of the market impact and could ultimately give Trump a green light to push the limits with his agenda.
“The markets have learned that these corrections don’t last, therefore, no reason to panic,” said Ethan Harris, former head of global economics at Bank of America. “And so it’s a self fulfilling thing. You don’t get the kind of big sell-off that might trigger a policy reversal.”
“A couple days sell-off in the stock and bond market doesn’t really move the needle,” Harris said. “You need a full correction. And in the case of the bond market, signs that it’s starting to crack, that people are getting extremely worried. And what we’ve had so far is hints of that, but nothing close to what I think triggers a pullback.”
European countries own about $8 trillion worth of US stocks and bonds, according to Deutsche Bank. A sell-off in US Treasuries could push borrowing costs higher. But it would take enormous coordination and carries risk of fueling volatility in global markets.
The EU has its “trade bazooka,” which could impact US businesses, including big tech companies that have driven market gains in recent years. But there is likely disagreement within Europe about how to respond to Trump.
“There are some tail risk scenarios like anti-coercion and the US confrontationally taking Greenland. That’s not our base case,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management. “So, as long as it doesn’t escalate to those kind of scenarios, I think market action would be pretty muted. The volatility is going to be short-lived, much less pronounced than the ‘Liberation Day’ sell-off we had.”
But instead of TACO, the president’s policy approach should be understood as “Trump Always Tries Again,” or TATA, according to Harris, noting that Trump has paused and delayed his policies to appease markets when necessary — but eventually pursued his original goals.
