The twin controversies about the northern island and the FED could undermine the dollar and cast a shadow on the April summit with China.
There is no formal link between the two. Yet they are connected in time – the crisis over Greenland, the island that US President Donald Trump wants for America, and the attempts to force Jerome Powell, Chairman of the Federal Reserve (FED), to resign. Both might scare allies and investors out of the dollar area and toward the Chinese RMB.
Trump reportedly wants Greenland (semi-independent from Denmark) to stave off Chinese and Russian encroachments, and wants Powell’s job, as he resists pressure to lower interest rates.
The Wall Street Journal reported (here) that:
“One potential beneficiary of the tug of war over the Federal Reserve’s independence: China. The criminal investigation into Powell is being viewed globally as an effort by the Trump administration to wrest control of monetary policy from the central bank. That… risks damaging investor confidence in the US financial system and the dollar, just as China is expanding use of its own currency around the world.”
In fact, the Atlantic Council wrote (here):
“For years, the prevailing assumption… was that central bank digital currencies (CBDCs), especially China’s digital yuan (e-CNY), would struggle to gain traction. Slow adoption, limited use cases, and public skepticism were expected to constrain their impact. New data from China, however, tell a different story. Five years after its first pilot… by the end of November 2025, it had processed more than 3.4 billion transactions worth roughly 16.7 trillion renminbi (about $2.3 trillion). That represents a more than 800% increase from 2023.”
All of this happens despite the RMB not being fully convertible and the Chinese markets not being fully open, unlike the dollar and the US market.
Chinese bet
Last week, the EU finally signed a new trade agreement with China, after endless controversies and fears of a flood of Chinese EVs entering Europe. Canada’s Prime Minister Mark Carney forged new commercial agreements with China. Those deals may amount to a non-confidence vote in Trump’s America.
China is not the only commercial story in Europe. The EU clinched a deal with Mercosur and worked on Free Trade Agreements (FTAs) with India and Japan. China is still considered a risk. Its bottomless production capabilities, supported by fathomless government subsidies, promise to burn millions of jobs if trade were truly opened. Europeans are well aware of that and know that new unemployment would elect fascist governments that would then start a war with China, the source of people’s unemployment. Chinese should be wary of that too.
Besides, China supports Russia and Iran, while the EU opposes both. But these issues may be less pressing than the ongoing US insistence on Greenland. Nobody opposes in principle that the island becomes American, but est modus in rebus. Trump should calmly convince Greenlanders of it, hold a referendum, win it, and take it. But this is not what is happening.
TikTokking international politics
Maybe Trump wants to keep the tension high, as in one of those social media clips with a twist every two seconds, so that the teenagers won’t switch off. Better if those twists succeed, but if they don’t, they are swept under the carpet, and one moves on to the next one. Provided it’s not an utter humiliation.
Greenland may look like an easy target against an easy enemy — Europe, large but spineless. Iran is far harder; it could become a quagmire. So, despite past promises of help, Trump has, for the time being, stepped back.
Greenland has about 50,000 inhabitants. Trump persuaded millions of Americans to elect him; he surely could convince some 20,000 (well over 50% of the voters) Greenlanders to join the US. But this would take time and serious effort — away from the quick returns of prime-time controversy. It looks like brinkmanship at TikTok speed.
It could become all psychotic, like one of those fast-paced short videos, and it could drive everybody mad. The world could lose all balance and lead everyone closer to accidents of any type. Maybe it is a new pattern of global politics dictated by the grammar of kids’ favorite media. Reagan was the hero of the TV space; Trump is the hero of smartphones. Or maybe Trump just likes chaos, as Maureen Dowd said (here).
In any case, the present apparent outcome is confusion among friends and investors seeking safer shores for their savings and investments. Kids aren’t usually good at capitalizing; investors don’t waste much time on social media.
Markets for stability
Here is the tough choice. Currently, the US holds a quasi-monopoly over global financial markets, propped up by the general belief in the American stock exchange’s independence, US military strength, and long-term stability, which is immune to sudden changes that could occur in authoritarian systems.
Authoritarians can meddle in the market, change policy overnight without public discussion, and a political crisis can upend their economies. The US didn’t have that for centuries. If it now seems it could have it, then other markets, like China, could look attractive.
Janan Ganesh echoes a wish for a European political union (here), noting that “A unified Europe, a cause that has long been associated with liberals, will start to appeal to traditionalists as the only hope against brash, technologically ascendant superpowers to the west (America) and east (China). It will be framed as a matter of cultural survival.”
But this is a long-term horizon. What could happen quickly is capital flight from Wall Street pushed by the twin pressures of Powell’s resignation and Greenland annexation. Moreover, in these circumstances, the April summit with China could take a very different spin. Beijing may feel vindicated in seeking not a real agreement but time to see how the US drama would evolve.
The US, in fact, seems to be considering a radical overhaul of the current order while it may just need a tweak. If a US overhaul is the plan, the Chinese alternative gains traction. For an overhaul, you may want to bet on a stable power, like China is projecting itself to be, rather than on someone who changes their mind overnight.