Tariffs and "emergency" tools may boost the dollar in the short term, but in the long term they will shake its reserve currency foundation.
2026-01-19 11:49:49
U.S. Treasury Secretary Scott Bessant said on Sunday (January 18) that the possibility of the U.S. Supreme Court overturning the president's ruling is "extremely slim." President Trump used emergency powers to enforce tariffs, and the court may make a ruling as early as this week.
The US government's frequent use of unconventional tools such as tariffs and "national emergencies," coupled with its involvement in territorial disputes, may initially boost the dollar in the short term due to safe-haven buying. However, this could undermine the dollar's foundation as the global reserve currency in the long run, exerting downward pressure on the dollar in the medium to long term.
On Monday during Asian trading hours, the US dollar index rose to a seven-week high of 99.49 before fluctuating downwards, with a daily decline of about 0.19%, and is currently trading around 99.20.
Bessant stated on the program, "I don't think the Supreme Court is likely to overturn a president's signature economic policy. They didn't overturn Obamacare, and I believe the Supreme Court doesn't want to create chaos."
In June 2025, the Supreme Court upheld a key provision of the Affordable Care Act that established a panel to recommend preventative healthcare services and required insurance companies to provide these services to patients free of charge.
Bessenter's remarks came a day after Trump announced a new round of tariffs on European goods imported into the US, pending a "full agreement to acquire Greenland." This statement marked a further escalation of trade tensions between the US and Europe.
According to sources within the White House, the Trump administration has drafted a list of punitive tariffs worth $7.5 billion, primarily targeting iconic European products such as French wine, German cars, and Italian luxury goods.
Trump did not specify which laws he was citing in his Truth Social post, but the move appears to mirror his "Liberation Day" tariffs imposed on dozens of countries under the International Emergency Economic Powers Act.
Trump announced that starting February 1, a 10% tariff would be imposed on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, with the tariff rate increasing to 25% on June 1, 2026.
The Supreme Court will rule on the legality of Trump's tariffs under the International Emergency Economic Powers Act (IEEPA) before the end of his term, but the decision could be made as early as this week. IEEPA grants the president broad powers to use economic sanctions in response to "unusual and exceptional threats."
Bessant stated that Trump's imposition of new tariffs on Europe regarding Greenland was in response to a national emergency.
Bessant stated, "A national emergency is about avoiding a national emergency; it's a strategic decision by the president... He can use America's economic power to avoid a hot war."
President Trump has long sought to acquire Greenland, Denmark's Arctic territory, and in recent weeks has intensified his pressure to allow the United States to take over the island. Leaders of Greenland, Denmark, and other European countries have generally rejected Trump's demands. Leaders of several European countries facing new tariffs responded last Sunday.
In a joint statement, the leaders of Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, and the United Kingdom said: "The threat of tariffs undermines transatlantic relations and could lead to a dangerous vicious cycle. We will continue to work together in solidarity to address this issue."
The statement said: "We stand firmly with the Kingdom of Denmark and the people of Greenland. Based on the process launched last week, we stand ready to engage in dialogue on the principles of sovereignty and territorial integrity—principles that are our unwavering position."
U.S. Vice President JD Vance and Secretary of State Marco Rubio met with Danish Foreign Minister Rasmussen and Greenlandic Foreign Minister Vivian Mozfeldt at the White House last week. Rasmussen described the talks as “frank but constructive.”
Following the meeting, the organization stated that the United States and Denmark would establish a high-level working group to plan for Greenland's future.
Tariffs will increase the cost of imported goods and exacerbate domestic inflation in the United States. At the same time, tariffs will harm the European economy and could backfire on US exports and corporate profits, ultimately dragging down global and US economic growth.
The US government's frequent use of unconventional tools such as tariffs and "national emergencies," coupled with its involvement in territorial disputes, may initially boost the dollar in the short term due to safe-haven buying . However, this could undermine the dollar's foundation as the global reserve currency in the long run, exerting downward pressure on the dollar in the medium to long term .
Traders will pay more attention to subsequent court rulings and actual countermeasures from Europe.
(US Dollar Index hourly chart, source: FX678)
At 11:40 Beijing time, the US dollar index is currently at 99.20.
The US government's frequent use of unconventional tools such as tariffs and "national emergencies," coupled with its involvement in territorial disputes, may initially boost the dollar in the short term due to safe-haven buying. However, this could undermine the dollar's foundation as the global reserve currency in the long run, exerting downward pressure on the dollar in the medium to long term.
On Monday during Asian trading hours, the US dollar index rose to a seven-week high of 99.49 before fluctuating downwards, with a daily decline of about 0.19%, and is currently trading around 99.20.
Treasury Secretary predicts: Supreme Court unlikely to overturn president's tariffs
Bessant stated on the program, "I don't think the Supreme Court is likely to overturn a president's signature economic policy. They didn't overturn Obamacare, and I believe the Supreme Court doesn't want to create chaos."
In June 2025, the Supreme Court upheld a key provision of the Affordable Care Act that established a panel to recommend preventative healthcare services and required insurance companies to provide these services to patients free of charge.
Bessenter's remarks came a day after Trump announced a new round of tariffs on European goods imported into the US, pending a "full agreement to acquire Greenland." This statement marked a further escalation of trade tensions between the US and Europe.
Greenland's price tag: A €7.5 billion tariff list targets core European industries.
According to sources within the White House, the Trump administration has drafted a list of punitive tariffs worth $7.5 billion, primarily targeting iconic European products such as French wine, German cars, and Italian luxury goods.
Trump did not specify which laws he was citing in his Truth Social post, but the move appears to mirror his "Liberation Day" tariffs imposed on dozens of countries under the International Emergency Economic Powers Act.
Trump announced that starting February 1, a 10% tariff would be imposed on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland, with the tariff rate increasing to 25% on June 1, 2026.
The legal red line debate: Should emergency powers be expanded again?
The Supreme Court will rule on the legality of Trump's tariffs under the International Emergency Economic Powers Act (IEEPA) before the end of his term, but the decision could be made as early as this week. IEEPA grants the president broad powers to use economic sanctions in response to "unusual and exceptional threats."
Bessant stated that Trump's imposition of new tariffs on Europe regarding Greenland was in response to a national emergency.
Bessant stated, "A national emergency is about avoiding a national emergency; it's a strategic decision by the president... He can use America's economic power to avoid a hot war."
President Trump has long sought to acquire Greenland, Denmark's Arctic territory, and in recent weeks has intensified his pressure to allow the United States to take over the island. Leaders of Greenland, Denmark, and other European countries have generally rejected Trump's demands. Leaders of several European countries facing new tariffs responded last Sunday.
Europe responds in unison: Uniting to reject blackmail.
In a joint statement, the leaders of Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, and the United Kingdom said: "The threat of tariffs undermines transatlantic relations and could lead to a dangerous vicious cycle. We will continue to work together in solidarity to address this issue."
The statement said: "We stand firmly with the Kingdom of Denmark and the people of Greenland. Based on the process launched last week, we stand ready to engage in dialogue on the principles of sovereignty and territorial integrity—principles that are our unwavering position."
U.S. Vice President JD Vance and Secretary of State Marco Rubio met with Danish Foreign Minister Rasmussen and Greenlandic Foreign Minister Vivian Mozfeldt at the White House last week. Rasmussen described the talks as “frank but constructive.”
Following the meeting, the organization stated that the United States and Denmark would establish a high-level working group to plan for Greenland's future.
Analysis of the impact on the US dollar
Tariffs will increase the cost of imported goods and exacerbate domestic inflation in the United States. At the same time, tariffs will harm the European economy and could backfire on US exports and corporate profits, ultimately dragging down global and US economic growth.
The US government's frequent use of unconventional tools such as tariffs and "national emergencies," coupled with its involvement in territorial disputes, may initially boost the dollar in the short term due to safe-haven buying . However, this could undermine the dollar's foundation as the global reserve currency in the long run, exerting downward pressure on the dollar in the medium to long term .
Traders will pay more attention to subsequent court rulings and actual countermeasures from Europe.
(US Dollar Index hourly chart, source: FX678)
At 11:40 Beijing time, the US dollar index is currently at 99.20.
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