Category Archives: Government

Britain, Business, Economic, Financial Markets, Government, International trade, United States

The US dollar: down but not out

ECONOMIC

Intro: Reports of the declining status of the US currency have been greatly exaggerated

For economists, the impact of a falling US dollar and how that impacts Britain will be observed and monitored closely. Of interest will be why the dollar has fallen of late, what President Trump’s attitude is towards the US currency, and how that impact will be felt.

The dollar lost around 2pc during January against a basket of major currencies (as measured by the DXY index). At the time of writing, the DXY is close to a four-year low of 96.79 – a staggering 10.7pc lower than this time last year. This significant weakening of the dollar has been driven by US policy shifts, tariff uncertainties, and geopolitical tensions. It also, to a lesser extent, reflects global effort to “de-dollarise” led by China and other large emerging markets.

Just days ago, the Federal Reserve held its main policy rate at 3.5-3.75pc. But the US central bank previously cut rates by 25 basis points at three consecutive meetings – in September, October, and December 2025. Lower rates typically weaken the dollar by reducing its appeal to yield-seeking investors, prompting capital flight to higher-return assets elsewhere. Financial markets are anticipating one or two more US rate cuts in 2026, putting further downward pressure on the dollar.

Since Trump took office last January, Fed boss Jerome Powell has come under intense pressure to cut rates faster and further, with the President eager to stimulate investment.

Nominated by Trump during his first term and reappointed four years later by President Biden, Powell has resisted. He has warned of the dangers of US inflation – 3pc as recently as September and still up at 2.7pc, above the 2pc target. Trump’s announcement that he wants Kevin Warsh as the next Fed boss when Powell’s term ends in May has seen the dollar strengthen, given Warsh’s reputation as an inflation-fighting hawk. Warsh, however, is also son-in-law of Trump’s long-standing friend and billionaire donor Ron Lauder. It is doubtful whether he’d be the president’s pick without having pledged to nudge the Fed’s policy committee towards lower borrowing costs – so the pace of rate cuts could quicken, putting more pressure on the dollar.

In theory, Trump’s tariffs should have bolstered the US currency by reducing imports and improving the US trade balance. But the scale of the measures announced on “Liberation Day” in April 2025 instead contributed heavily to the dollar’s fall in value.

The president’s measures – initially hiking average effective tariffs from 2.5pc to 27pc within a month – sparked market turmoil, including an asset sell-off that pressured the US currency. Direct retaliation from major trading powers including China and the EU further eroded investor confidence and prompted US capital outflows. Trump’s tariffs, while they are less punitive than first announced, have combined with broader macroeconomic concerns – including the rise of America’s debt from 100pc to 125pc of GDP over the last decade – to drive considerable “sell America” outflows to other major currencies.

While the related dollar weakening has aggravated US inflation, a cheaper currency helps US exporters, not least “rust belt” manufacturers that are a priority among Trump’s “Make America Great Again” (MAGA) movement. That’s why many are inclined to think the president wants the dollar to keep on falling.

Trump has fuelled these concerns, pointing to the “great valuation” of the sharply depreciated US currency. There are suspicions the White House initially made its maximalist tariff demands not only as a bargaining ploy, but to strategically devalue the currency. The president’s dollar stance is nuanced – and often contradictory. He values “reserve currency status”, which sees the dollar demanded around the world both for payment transactions and a store of value. That supports the US currency, allowing America to run looser monetary policy without the inflationary impact of a dangerously weak dollar. Nonetheless, Trump has also shown willingness to tolerate and even encourage dollar depreciation for export gains (given his emphasis on appealing to blue-collar workers). Talk of the dollar’s demise, and its loss of reserve currency status, is, without doubt, overdone. The US currency still accounts for about 60pc of global foreign exchange reserves and almost 90pc of global transactions by value, underscoring its entrenched role.

Quite clearly, as the dollar has weakened, certain “safe haven” currencies have gained, with the Swiss franc up 13pc against the dollar during 2025. And despite its recent volatility, gold has soared from around $3,100 to over $4,900 an ounce since April 2025, such has been the impact of Trump’s “shock and awe” tariff announcement and the escalation of geopolitical tensions ever since.

When it comes to pound sterling, and the broader UK economy, a weaker dollar delivers a mixed offering. Benefits in lower import costs and inflation are offset by challenges for exporters, investors, and multinational firms. Since Trump’s second term, the pound has strengthened around 12pc against the dollar, from roughly $1.23 to $1.37. This makes dollar-denominated imports cheaper, reducing costs for US goods and dollar-priced commodities like oil.

And while the UK remains an inflation outlier, with a headline rate of 3.4pc in December, up from 3.2pc the previous month and higher than other G7 nations, domestic price pressure would have been even worse were it not for a falling US currency. Tourists and businesses travelling to, or dealing with, the US have also gained, with pounds stretching further abroad.

Yet the downsides are significant, particularly for UK-based companies with substantial US exposure. British-based exporters to the US have found their goods more expensive in dollar terms, undermining competitiveness and demand – especially amid US tariffs that add further barriers.

Overall, while a weaker dollar has flattered the value of sterling, and helped keep a lid on UK inflation, it has also exposed many of the UK’s structural weaknesses – a trend that looks set to continue.

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Denmark, Europe, European Union, Government, Greenland, NATO, Politics, Society, United States

The reasons behind Trump’s desire to acquire Greenland

UNITED STATES – GREENLAND

It is said that Donald Trump’s much-vaunted desire to acquire Greenland is all about US national security.

First, the US president claimed the Arctic island, a self-governing territory of the Kingdom of Denmark, was being swarmed by Russian and Chinese vessels. Then he said ownership of the sprawling territory was vital for his planned “Golden Dome” missile defence shield.

There are hints of truth in both claims, but security experts have broadly argued that a US acquisition of Greenland is not necessary to address the national security concerns.

The sparsely populated island plays an outsized role in the United States’ and NATO’s wider air defence architecture. It sits smack bang in the middle of the shortest flight path between Moscow and Washington – known as the great-circle distance.

Technically, the island is 2,000 miles from Washington and 2,000 miles from Moscow.

Since the end of the Second World War, the US has had military personnel stationed at Pituffik Space Base, on the far north coast of Greenland. It serves as the US military’s northernmost base, about 900 miles from the North Pole and is home to about 150 troops. It is a key cog in Washington’s early warning system for missiles. If Russia or China were to fire a ballistic missile at the US, its path would probably cross directly over Greenland, which is why the primary role of the personnel at Pituffik is to scan the skies for incoming aerial threats.

However, America’s military footprint on Greenland has significantly dwindled since the end of the Cold War.

At its peak, Washington had 17 installations and 15,000 soldiers on the island, hunting for Soviet submarines and ships, as well as being ready for a feared invasion.

This was underpinned by a 1951 agreement signed between the US and Danish governments. Copenhagen has repeatedly argued this deal still stands, and there is nothing preventing Mr Trump from deploying more soldiers to Greenland without the need to acquire the island.

This includes hosting any assets that would contribute to the US’s Golden Dome project – a $175bn (£131bn) air defence system that would mimic Israel’s Iron Dome, but on a vastly larger scale. Mr Trump had not mentioned Greenland, however, as being vital to this decade-long project until just recently – suggesting it has become a convenient excuse for the White House to use.

The Golden Dome project, it has been claimed, would also involve a system of satellites – some that track missiles and others that fire their own projectiles to shoot them down.

While analysts have questioned whether such technology even exists, or is likely to exist any time soon, US ownership of Greenland would not be a prerequisite for an American satellite defence system.

In real terms, Pituffik’s importance is expected to grow as climate change reshapes the polar Arctic by opening up new trade routes close to North America.

Greenland sits where the Arctic Ocean meets the Atlantic.

Russian ships and submarines leaving the country’s Arctic region bases to head south have to pass nearby to do so. One of the main routes sees the Russian vessels pass through the waters between Greenland, Iceland, and the UK – known as the GIUK Gap.

A second gap, the Bear Gap, between Norway and Iceland has also emerged as a favoured option.

Since Vladimir Putin ordered his invasion of Ukraine, NATO has increased its aerial and naval patrols in the area. Denmark says it will invest £1.73bn to bolster its Arctic Command with new ships, drones, and surveillance aircraft to guard the region. The spending was announced in January last year to deter Mr Trump’s interest in Greenland.

Again, as with missile defence, bolstering security in the waters around Greenland does not require acquisition of the island.

Denmark insists Washington could use existing treaties to address those national security concerns.

Greenland’s geography might provide the easiest route to explaining Mr Trump’s desire to acquire the territory. The island’s capital is closer to Washington than it is Copenhagen.

But it could be down to the maps drawn by Gerardus Mercator in the 16th century, and still commonly used.

On the Mercator Map, areas near the poles are greatly exaggerated in size.

Greenland can appear to be the same size of Africa, despite being 14-times smaller. South America also appears smaller than the Arctic island.

Mr Trump has publicly spoken of his love of maps, and for the size of perceived regional superpowers, such as the US or Russia. To some, the Mercator Distortion could just make a combined US-Greenland landmass look bigger than Russia.

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Denmark, Europe, European Union, Government, Greenland, History, National Security, NATO, Politics, United States

Solutions emerge that could solve the Greenland crisis

GREENLAND

Intro: Turning disused military facilities on Greenland into “sovereign” US bases would hand Donald Trump a territorial prize without him launching a full-scale invasion

High above the Arctic Circle, surrounded by Greenland’s frozen wastes, American scientists conducting a secret research project hit upon a brilliant and remarkable idea.

Suppose nuclear missiles could be hidden inside the polar ice cap? These instruments of Armageddon might be able to survive a Soviet strike and then wreak terrible revenge. Alas, the US military had to abandon this dream after finding that constantly shifting ice fields were never going to provide safe shelter for missile silos.

But the location of this scheme in the 1960s – a once-secret “city under the ice” known as Camp Century – may hold the key to resolving a diplomatic impasse that European governments never believed they would have to contend with. Namely, the prospect of America seizing Greenland from Denmark.

Just days ago, President Trump said: “If we don’t take Greenland, Russia or China will – and I’m not letting that happen… one way or the other, we’re going to have Greenland.”

The dawning realisation that he is deadly serious has triggered a scramble for solutions, intended to avoid the catastrophe of America using force against an ally.

“If the United States chooses to attack another NATO country militarily, then everything stops, including our NATO agreement – and thus the security that has been provided since the end of the Second World War,” said Mette Frederiksen, the Danish prime minister. The clock on defusing the crisis is ticking.

US vice-president JD Vance and secretary of state Marco Rubio met with the Danish and Greenlandic foreign ministers in the White House, but President Trump again warned that anything less than American control of Greenland was “unacceptable”.

France’s foreign minister, Jean-Noël Barrot, has said that France would open a consulate in Greenland on February 6, acting on a decision taken last year during President Emmanuel Macron’s visit to the territory.

Plans are also being laid for a new NATO mission to secure Greenland, which will probably involve UK forces. Yet, if that idea is not enough to satisfy Trump, the solution could lie on a small island 4,000 miles away.

Cyprus has hosted British bases throughout its 65-year history as an independent state. Today, RAF Akrotiri on its southern coast serves as Britain’s busiest overseas base, while GCHQ has a vital listening post in the eastern Dhekelia area. What makes these facilities different is that both are located on British sovereign territory. The Union flag flies over Akrotiri and Dhekelia, whose 98 square miles – or 3 per cent of the island of Cyprus – are, legally speaking, just as British as any other town or county in the UK.

Suppose America’s military installations in Greenland were to be converted into “sovereign base areas” on the Cyprus model. Given that this arrangement has worked for nearly seven decades on a small and crowded Mediterranean island, it should be relatively simple to replicate on a vast and largely empty territory like Greenland. Could this be the answer?

Michael Clarke, a visiting professor at the Department of War Studies at King’s College London, says it might be a way of giving Trump the sort of victory that he wants, and so it has plausibility.

Any possible solution has to deal with the fact that Trump’s public reasons for taking Greenland make no objective sense: “We need Greenland from the standpoint of national security,” he says, apparently unaware that America already has an agreement with Denmark signed in 1951, allowing the US to “construct, install, maintain and operate” any military base on Greenland and to “station and house personnel”.

The US military also enjoys free access to the seas around the island. If Trump is right to claim that Russian and Chinese ships are now prowling these waters, then America can already counter this threat. There is simply no need for Trump to “have” Greenland.

During the Cold War, the US used its rights under the 1951 accord to build at least 17 installations across the island, ranging from airfields to radar stations and weather observatories.

In the high north, more than 1,000 miles from Greenland’s capital, Nuuk, American engineers tunnelled into a glacier to create Camp Century in 1960. Powered by a nuclear reactor, this secret maze of living quarters and research facilities – codenamed “Project Iceworm” – housed 200 specialists studying the possibility of hiding missile silos beneath the snow. When that proved impossible, Camp Century was shut in 1967. Later, as the Cold War came to an end, America dismantled all but one of its military installations in Greenland, withdrawing virtually all of its 6,000 personnel.

Today, the only remaining US facility is Pituffik Space Base on the shores of Baffin Bay, 138 miles west of the carcass of Camp Century. It is here where about 200 personnel watch for incoming ballistic missiles as part of the US Early Warning System. If Pituffik were to become US sovereign territory, then Trump would be able to say that he had planted the Stars and Stripes in the snow and gained new land for the United States. If the same status were to be accorded to the abandoned tunnels and unusable silos of Camp Century – and perhaps the locations of all the other former military sites – then 17 US flags might appear on the map, and a few hundred square miles of Arctic ice cap be added to America. Given that Greenland covers more than 836,000 square miles and has only 56,000 people, this would make little practical difference. No-one’s life would be changed if the Stars and Stripes were to fly over some uninhabited inlets far above the Arctic Circle. Even if the boundaries of any sovereign base areas were to be drawn as expansively as possible, and Trump gained a few thousand square miles, that would only amount to a fraction of Greenland.

“The real issue is that Trump wants to add a big chunk of territory to the United States so that he gets his face on Mount Rushmore,” says Prof Clarke. “He’s not going to get the Nobel Peace Prize, so he wants another sort of prize.”

About 40 per cent of the current territory of the United States was bought, with the Louisiana Purchase of 1803 and the Alaska Purchase of 1867 being the most famous examples, and Trump seemingly yearns for something comparable. Granting America sovereign base areas in Greenland may be a way of handing him the prize that he craves – without, in practice, changing very much.

The International Security Programme at the Chatham House think tank certainly agrees that this could be a solution, while adding that any territorial concessions made under US pressure would be a bitter pill for Denmark and Greenland.

Chatham House believes that although this would still be a big concession for Denmark and Greenland to make, it would be a better concession than risking an American attack. It stresses, that for Denmark and Greenland, this is now such a matter of national security that they probably could make far-reaching concessions in bringing this impasse to an end.

There must be a danger that Trump may act unilaterally and simply declare US sovereignty over Pituffik, and perhaps the chain of defunct installations, including Camp Century.

Denmark’s best option could be to pre-empt him by offering to convert these facilities into sovereign base areas as part of an overall settlement.

Some possibilities are infinitely worse. Rubio has said that America wants to buy the entirety of Greenland, reviving Trump’s proposal from his first presidential term. But the Danish government has neither the legal power nor the appetite to sell its territory.

If no solution is possible, Denmark could stand firm and rally its European allies, hoping that Trump’s attention may turn elsewhere. But that option increases the risk of America resorting to military action – and just about anything would be better than that calamity.

Yet, even if the confrontation could be resolved by giving the US sovereign base areas, Prof Clarke believes this outcome would still weaken the West. “NATO will have suffered because of that – the fact that they’ve had to buy him off. And Denmark will have suffered. So NATO would still come out of this weaker,” he said. “But it would not be as destructive as the possible alternative.”

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