US tariff threat reignites debate over ‘sell USA’ trades
Dollar drops while European currencies rise
Investors hope situation will de-escalate
By Yoruk Bahceli and Dhara Ranasinghe
LONDON, Jan 19 (Reuters) - U.S. President Donald Trump’s renewed tariff threats against European allies amid rising tension over Greenland have revived talk of the ‘Sell America’ trade that emerged in the aftermath of his sweeping Liberation Day levies last April.
Stock markets bore the brunt on Monday of fears that the trade war could re-escalate, with European equities dropping over 1% and U.S. stock futures taking a similar hit that points to weakness following Monday’s public holiday.
The dollar was on the back foot too, a sign that the world’s No.1 reserve currency was also in the crosshairs of Trump’s threat on Saturday to increase tariffs on goods from several European countries until the United States is allowed to buy Greenland. They will start with a 10% tariff from February 1, rising to 25% on June 1.
The euro (EUR=) bounced from its lowest since late November, along with sterling and Scandinavian currencies. The Swiss franc (CHF=) , a classic safe haven, headed for its largest daily rise against the dollar in a month.
“I’m sure that there are a lot of people that are fairly aghast at what happened over the weekend and probably thinking about how they hold their assets,” said Francesca Fornasari, head of currency solutions at Insight Investment.
She said the dollar could move lower but was also supported by a strong U.S. economy and U.S. shares.
And so far, market moves are modest, especially compared to last April’s near 2% daily dollar slide following Liberation Day. It’s a sign, some analysts said, that markets think Trump will end up de-escalating, as he has done previously.
A pending U.S. Supreme Court ruling on the legality of Trump’s tariffs and uncertainty on how European capitals will respond also blur the picture.
The EU may respond with tariffs against the U.S., but could also implement the so far untested “anti-coercion instrument”, which could limit U.S. access to public tenders, investments or banking activity ‍or restrict trade in services.
“For the most part so far it would appear to be more noise than signal at this point,” said Leonard Kwan, fixed income portfolio manager at T Rowe Price.
<h3>WILL EUROPEAN INVESTORS DUMP U.S. ASSETS?</h3>
While deep and liquid U.S. capital markets - the Treasury market alone is worth $30 trillion - make diversification for international investors hard, the U.S. is also vulnerable to foreign outflows, analysts said.
European countries are the United States’ biggest creditor, owning $8 trillion worth of equities and bonds, almost twice as much as the rest of the world combined, said Deutsche Bank.
“In an environment where the geoeconomic stability of the Western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part,” Deutsche Bank’s global head of FX research George Saravelos wrote.
The question is whether European investors would sell and what that would take.
ING said that there would be little the EU could do to force European private sector investors to sell dollar assets, it could only try to incentivise investments in euro ones.
Analysts noted that the market backdrop is very different to last April, given the dollar has fallen since then and the economic outlook has improved, while it remains difficult to diversify away from the dollar.
The greenback, which plunged nearly 10% in 2025 against peers, has stabilised in recent months. Investors have unwound last year’s bets against the dollar and hold a modestly bullish position worth just $240 million, meaning sentiment could shift again.
“The situation probably needs to escalate a fair bit further before they (European public sector investors) damage their investment performance for political purposes,” said Societe Generale’s head of FX strategy Kit Juckes.
While U.S. stocks had a strong year in 2025, boosted by AI hopes, they lagged global equity markets and 93% of countries in a global MSCI stock index have outperformed the U.S. so far in 2026, Barclays said.
It added that appetite to diversify portfolios remains strong among the bank’s clients given U.S. risks.
“None of this necessarily implies a disorderly rotation, but we believe that it does tilt the balance of risks more towards incremental diversification into international equities,” Barclays said.
Even if European assets could potentially benefit from shifts away from the U.S., Trump’s tariff threats renew uncertainty for Europe’s economy.
Capital Economics said the countries most exposed to increased U.S. tariffs were the UK and Germany, estimating that a 25% tariff could knock 0.2%–0.3% off their output.
Economists warned the full economic impact could be larger given uncertainty and potential EU retaliation.
Investment by German firms in the United States nearly halved in February to November 2025 from a year earlier, Reuters reported on Monday, due to trade uncertainty and higher tariffs.
“Most investors think this is going to be a good year for the economy. There is over-confidence and therefore some fragility building,” said Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson.
Investors and the US dollar
<img src="https://imageproxy.pbkrs.com/https://reut.rs/4qtiZTD?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="994" original-src="https://imageproxy.pbkrs.com/https://reut.rs/4qtiZTD"/>

U.S. President Trump's renewed tariff threats against Europe over Greenland have reignited discussions about the 'Sell America' trade. The dollar weakened while European currencies rose, and stock markets fell amid fears of escalating trade tensions. Analysts suggest that while the situation is concerning, it may not lead to significant market shifts unless it escalates further. The EU may respond with tariffs or other measures, but the impact on U.S. capital markets remains uncertain. Economists warn that increased tariffs could negatively affect the UK and Germany's economic output.

- U.S. President Trump's renewed tariff threats against Europe have caused concerns in stock markets, with European equities dropping and the dollar weakening.  
- Analysts note that while these developments may push European investors to consider shifting from U.S. assets, significant actions are unlikely due to deep U.S. capital markets and a currently favorable economic outlook.  
- The potential impact of new tariffs could negatively affect the economies of the UK and Germany, with estimates suggesting a possible reduction in output by 0.2% to 0.3%.

Reuters

VG Financial

VG Value

Invesco DB US Dollar Index Bullish Fund

Dow Jones U.S. Index

Ark Innovation ETF

Freeport Mcmoran

ISHRS Russ 1000 Growth

Dow Jones Industrial Average

Ps S&P Low Vol

Invesco S&P 500 Eq Wgt ETF

Fidelity MSCI Financials Index

VG S&P M-Cap 400 Val

ISHRS S&P Glb It

VG Mga Cap 300 Grw

iShares Core S&P US Growth

ISHRS Russ 2000 Val

S&P 500

Schwab US Div Eq

VanEck Semiconductor ETF

iShares MSCI USA Value Factor ETF

NASDAQ Composite Index

Ark Genomic Revolution ETF

Franklin Exponential Data ETF

iShares Semiconductor ETF

ISHRS Us Brokers & Sec Exchg

VG Mid-Cap Val

SPDR S&P 600 S-Cp Val

Pro UltrPro Dow30

Avantis US Large Cap Value ETF

VG Growth

iShares Future AI & Tech ETF

Schw Us L-Cp Grw

iShares Dow Jones US

Invesco Semiconductors ETF

SPDR Djia

Avantis U.S. Small Cap Value

JPMorgan Equity Premium Inc ETF

Guggenheim DJIA Ave Div

Global X Cloud Computing ETF

Global X Nasdaq 100 Covered Call ETF

ANALYSIS-Trump's Europe tariff threat over Greenland revives talk of 'Sell America' trade