Unlock the White House Watch newsletter for free

Your guide to what Trump’s second term means for Washington, business and the world

The dollar and Wall Street stocks fell on Tuesday after Donald Trump said there was “no going back” on his campaign to take control of Greenland even as he offered talks over the issue that has put the US and its European allies at loggerheads.

The US currency fell 0.8 per cent against the euro, while the S&P 500 was down about 1.7 per cent amid increasing transatlantic tensions and threats of a trade war. The tech-focused Nasdaq Composite index was down 1.8 per cent.

European equities also fell, with the Stoxx Europe 600 closing 0.7 per cent lower.

The US president and European leaders traded criticism over his grab for the island, with French President Emmanuel Macron taking aim at Trump’s “useless aggressivity” and Belgian premier Bart De Wever urging Europeans to “call his bluff now”.

Danish Prime Minister Mette Frederiksen said her country needed “to stand firm and show what we are made of” even as it was “threatened by our closest ally”.

Trump’s threat to impose extra tariffs next month on eight European states that recently sent military personnel to Greenland has undermined trust between Washington and European capitals and is dominating the World Economic Forum in Davos, where he is due to arrive on Wednesday.

The main parties in the European parliament agreed on Tuesday to suspend ratification of last year’s EU-US trade deal and Brussels is likely to impose tit-for-tat tariffs if Trump follows through on his threats.

The US president said on Tuesday he had “agreed to a meeting of the various parties” in Davos over the Greenland stand-off.

Despite what he characterised as a “very good” call with Nato secretary-general Mark Rutte, he said that “there can be no going back” on his plan to seize the territory.

Trump posted what appeared to be an AI-generated image of himself, vice-president JD Vance and secretary of state Marco Rubio in the vast Arctic island with an American flag and a sign reading: “US territory EST 2026.”

European Commission president Ursula von der Leyen warned of a “dangerous downward spiral” if the president pressed ahead with his push to make Denmark cede Greenland, vowing an “unflinching, united and proportional” response.

Trump hit back at criticism that he risks blowing up the transatlantic alliance, saying on his Truth Social platform that without him “there would be no NATO right now” and that the military pact “would have been in the ash heap of History.”

In Davos, US Treasury secretary Scott Bessent urged America’s trading partners to “take a deep breath and let things play out”, adding that “the worst thing countries can do is escalate against the US”.

Bessent stressed America’s commitment to Nato, saying “of course Europe is an ally”.

In a barrage of early morning posts on Truth Social, Trump took aim at European leaders. He accused the UK of “great stupidity” over its plan to transfer ownership of the Chagos Islands, including the US air base of Diego Garcia, to Mauritius. He cited the move as “another in a very long line of National Security reasons why Greenland has to be acquired”.

He also posted messages from Macron, in which the French president said: “I do not understand what you are doing on Greenland.”

On Monday night Trump threatened to put 200 per cent tariffs on French wine and champagne over Macron’s reported reluctance to join a US-led Board of Peace for Gaza and potentially other global hotspots.