Tariff threats revive ‘Sell America’ fears as Trump rekindles trade war jitters

Renewed tariff threats by U.S. President Donald Trump against European allies have reignited concerns around a potential “Sell America” trade, a theme that first gained traction after his sweeping Liberation Day levies last April, according to Reuters.

Markets reacted sharply on Monday as fears of a fresh escalation in the trade war resurfaced. European equities fell more than 1%, while U.S. stock futures also pointed to weakness following a public holiday. Currency markets reflected similar unease, with the U.S. dollar coming under pressure amid signs that investors were reassessing exposure to U.S. assets, Reuters reported.

The renewed jitters followed Trump’s warning over the weekend that the United States could raise tariffs on goods from several European countries unless Washington is allowed to buy Greenland. Under the proposal, tariffs would begin at 10% from February 1 and rise to 25% by June 1. The move has added a geopolitical dimension to existing trade tensions, putting both U.S. and European assets in focus.


The euro rebounded from its weakest level since late November, while sterling and Scandinavian currencies also strengthened. The Swiss franc, traditionally seen as a safe haven, recorded its strongest daily gain against the dollar in about a month, according to Reuters.

Despite the reaction, market movements have so far been relatively contained compared to last April, when the dollar fell nearly 2% in a single day following the Liberation Day announcements. Some analysts cited by Reuters said this suggested investors believe the rhetoric may ultimately cool, as has happened in previous episodes.

The outlook is further clouded by a pending U.S. Supreme Court ruling on the legality of Trump’s tariffs, as well as uncertainty over how European governments might respond. The European Union could retaliate with tariffs of its own or potentially deploy its largely untested “anti-coercion instrument,” which could restrict U.S. access to public procurement, investment opportunities, banking activity or services trade.

A key question for global markets is whether European investors might meaningfully reduce their exposure to U.S. assets. While the depth and liquidity of U.S. capital markets make diversification difficult, analysts told Reuters that the United States remains vulnerable to foreign outflows. European investors are the largest foreign holders of U.S. assets, owning around $8 trillion worth of equities and bonds, nearly twice as much as the rest of the world combined, according to Deutsche Bank.

However, analysts cautioned that a large-scale shift is far from certain. The dollar has already fallen sharply over the past year and has since stabilised, while the U.S. economic outlook has improved. At the same time, alternatives to the dollar remain limited for many global investors, Reuters noted.

Positioning data also suggests that sentiment toward the dollar is no longer extremely negative, meaning it could still swing in either direction. Analysts said that a more pronounced escalation in trade and geopolitical tensions would likely be required before European public sector investors were willing to risk underperforming benchmarks due to political reasons.

Equity market performance adds another layer to the debate. While U.S. stocks delivered strong gains in 2025 on optimism around artificial intelligence, they have lagged global peers more recently. Barclays data cited by Reuters showed that the vast majority of countries in a global MSCI index have outperformed the U.S. so far in 2026, reinforcing investor interest in international diversification.

Even so, renewed tariff threats pose risks for Europe’s own economy. Capital Economics estimates that a 25% U.S. tariff could shave 0.2%–0.3% off output in the UK and Germany, the two European economies most exposed. Economists warned that the overall impact could be larger once uncertainty and potential EU retaliation are factored in.

Reflecting these concerns, investment by German companies in the United States nearly halved between February and November 2025 compared with the previous year, as trade uncertainty and higher tariffs weighed on corporate decisions, Reuters reported.

With markets still digesting the latest developments, analysts said confidence in the global economic outlook remains high, but warned that growing complacency could leave investors vulnerable if trade tensions intensify further.

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