Core Viewpoint - The announcement of a 10% tariff on European countries by President Trump has led to a decline in the dollar, raising concerns about holding American assets due to unpredictable US policies [1]. Currency Impact - European currencies, particularly the Swiss franc, have gained strength as investors seek safe-haven assets, with the euro recovering from a two-month low [2]. - The Swiss franc is expected to benefit significantly in a context of a weaker dollar [3]. Market Dynamics - Elevated USD exposure in Europe may prompt a rebalancing of dollar assets, especially if the EU activates its anti-coercion measures, which could disrupt capital markets more than trade flows [4]. - Trump's tariff threats have reignited the trend of "selling America," with potential implications for the USD as a negotiating tactic [5]. Geopolitical Risks - The eurozone may face cyclical challenges due to increasing geopolitical risks under Trump's presidency, potentially exacerbating pressures related to the ongoing conflict in Ukraine [6]. - US assets are now perceived to carry a higher political risk premium, which may lead foreign investors to reduce their exposure to US assets [7].

Group 1 - The European Union is considering using its "anti-coercion instrument" to target foreign direct investment and finance in response to U.S. tariffs imposed by President Trump [1] - A 10% tariff rising to 25% is estimated to reduce GDP in targeted NATO economies by 0.1-0.3 percentage points and add 0.1-0.2 points to U.S. inflation, with political ramifications being more significant than economic ones [2] - European officials have firmly stated that Greenland's sovereignty is non-negotiable, while the U.S. remains steadfast in its position [3] Group 2 - Europe holds a significant amount of U.S. Treasuries, which helps balance America's external deficits, making it the largest lender to the U.S. [4] - European countries own $8 trillion of U.S. bonds and equities, nearly double the amount held by the rest of the world combined, raising questions about their willingness to continue this support amid geopolitical tensions [5] - Danish pension funds have begun reducing their dollar exposure and repatriating funds in response to concerns over U.S. trade policies, indicating a shift in investment strategy [6][7] Group 3 - The euro and Danish krone are expected to experience minimal impact from the fallout of Trump's tariffs and any potential retaliation [8]