Shock and awe in Davos

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British Prime Minister Harold Wilson once quipped in 1964 that “a week is a long time in politics.” He never experienced Trump II. It feels like three years of events have been crammed into January — and the month isn’t over yet.

First there was the lightning U.S. military campaign on Jan. 3 that ousted Venezuelan leader Nicolas Maduro. It didn’t take long for President Donald Trump to position himself as the triumphant administrator-in-chief of a new client state. A week later, Federal Reserve Chair Jerome Powell announced he was under a criminal investigation by Trump’s Department of Justice. 

It stirred dissent among Republicans in Congress after a year of deferring to the president and his bottomless appetite to expand executive branch powers at their expense. Trump followed up the Powell probe with threats of military force in Iran and Colombia. Ultimately, he set his sights on demanding Greenland. He threatened 10% tariffs on eight European countries including Denmark, France, and Britain if the Arctic territory wasn’t ceded to him.

This week, Trump took his shock and awe spectacle to the World Economic Forum in Davos, Switzerland. The annual confab of political leaders and chief executives provided a scenic Alpine backdrop to Trump and his flamethrower a year after he re-entered the Oval Office. 

In a meandering speech Wednesday, the president stuck to his demands for Greenland and argued it was critical to U.S. national security. Hours later, Trump announced “a framework” agreement that provided little specifics on Greenland’s future. The White House only said more details would be released over time.

It cemented a supercharged, winner-take-all capitalism that has Trump front-and-center, dictating to chief executives and foreign leaders to get the latest item on his wish list. Close observers argue that Davos’ top-down model to implement economic reforms is out of place in a world where powerful business and political elites are unable or unwilling to do so.

“Davos was born of this age when we thought that change coming down from the top could make the world system work better. Now it's apparent that can't work,” Elizabeth MacBride, author of the new book Capital Evolution: The New American Economy, told Quartz Washington. “So I think what's happening now is people in the middle, mid-level executives, small business owners… are increasingly worried about the long-term future.”

‘A dizzying ride’

Those nerves did extend to Davos’ political and financial elite. At the start of the week, Trump threatened to impose tariffs on several European countries in his belligerent quest to annex Greenland. In doing so, he tore up an interim trade accord he’d reached with the European Union last summer — the latest of his cannon shots in a forever trade war.

“The topic is changing by day,” Delaware Democratic Sen. Chris Coons told CBS News. “Is it the strike on Venezuela, the threats against Iran? The threats against Cuba and Colombia? Adventurism with regards to Denmark and Greenland? Trump has taken Europe on a dizzying ride.”

U.S. bonds went on a mini-coaster ride. Treasury yields for both the 10-year and 30-year notes climbed to reach their highest levels since September, though they settled once Trump dialed back his aggressive rhetoric on Greenland. Investor fears were fanned after a Danish pension fund for teachers reportedly planned to dump $100 million in holdings by the end of the month. 

It’s a tiny piece of the U.S. Treasury market, but the development packed a symbolic punch nonetheless — and certainly raised eyebrows among financial heavyweights.

Billionaire investor Ray Dalio warned of a backlash that may cause foreign investors to reconsider their willingness to hang onto U.S. assets. “If you take the conflicts, you can’t ignore the possibility of the capital wars,” Dalio said on CNBC. “In other words, maybe there’s not the same inclination to buy at U.S. debt and so on.”

Trump’s top lieutenants strained to prevent blowback in financial markets, including Treasury Secretary Scott Bessent. “What I am urging everyone here to do is sit back, take a deep breath, and let things play out,” Bessent said Tuesday. 

However, he stripped his diplomatic touch when it came to Denmark. “Denmark’s investment in U.S. Treasury bonds, like Denmark itself, is irrelevant,” Bessent said a day later.

Perhaps the most blunt remarks came from Canadian Prime Minister Mark Carney. He described a “rupture” in the institutions-based international order that has long prioritized open markets, free trade, and human rights. Now the integration underpinning that Western-based order was weaponized, he said in his own Davos speech. Notably, he didn’t assign blame, naming neither the U.S. or Trump.

He urged “middle powers” to band together and develop strategic autonomy to ensure their prosperity: “Middle powers must act together because if you are not at the table, you are on the menu.”