Wall Street Falls Victim to Trump’s Trade Threats: Markets React to Escalating US-EU Tensions
- How Did US Markets React to Trump's Greenland Gambit?
- What Exactly Is Trump Threatening?
- How Is Europe Fighting Back?
- Which Assets Are Benefiting From the Turmoil?
- What About Corporate Developments?
- What's Next for Markets?
- Frequently Asked Questions
Wall Street opened the week sharply lower as investors digested President Trump's latest trade threats against Europe over Greenland. The Dow Jones, Nasdaq, and S&P 500 all dropped over 1%, while gold hit record highs as geopolitical tensions flared. Meanwhile, European leaders are preparing retaliatory measures, including potential €93 billion in tariffs on US goods. Here's a deep dive into the market fallout and what it means for investors.
How Did US Markets React to Trump's Greenland Gambit?
After a three-day weekend honoring Martin Luther King Jr. Day, US indices started the week in the red. By 5 PM ET, the Dow Jones had fallen 0.99% to 48,868 points, the Nasdaq Composite dropped 1.36% to 23,195 points, and the S&P 500 stumbled 1.08% to 6,865 points. This mirrored declines seen earlier in European markets as traders priced in the escalating trade war.
What Exactly Is Trump Threatening?
The US President has warned he'll impose 10% additional tariffs on imports from eight European countries (Denmark, Norway, Sweden, France, Germany, Netherlands, Finland, and the UK) starting February 1st unless they back off supporting Greenland's autonomy. If the US fails in its bid to purchase Greenland by June, those tariffs could jump to 25%. As one BTCC analyst noted, "This represents a significant escalation in Trump's economic coercion tactics."
How Is Europe Fighting Back?
European leaders aren't taking this lying down. They're considering €93 billion in counter-tariffs on US goods entering the EU. French President Emmanuel Macron is pushing to use the EU's new anti-coercion instrument, adopted in late 2023. This nuclear option could:
- Ban US companies from EU public contracts
- Block American banks and service firms from EU markets
- Suspend US intellectual property protections
Macron, speaking from Davos, called Trump's threats "unacceptable" and warned against "passively accepting the law of the jungle."
Which Assets Are Benefiting From the Turmoil?
Safe havens are seeing massive inflows. Gold hit an all-time high of $4,749.84/oz, while silver reached $95.89/oz. In bonds, the 10-year US Treasury yield climbed to 4.3105%, its highest since August 2025. The euro strengthened 0.77% against the dollar to 1.1735, while bitcoin dropped 2.34% to $90,402 - back to levels from ten days prior.
What About Corporate Developments?
3M plunged 7.5% to $155.22 after disappointing 2026 guidance, despite solid quarterly results. Micron Technology announced a $1.8 billion cash deal to acquire Powerchip Semiconductor's P5 facility in Taiwan. Moderna and Merck reported positive five-year data for their experimental melanoma vaccine combined with Keytruda immunotherapy.
What's Next for Markets?
With no major economic data today, focus remains on geopolitics. Later this week brings final Q3 US GDP figures, household spending data, and consumer confidence numbers. As one trader quipped, "At this rate, we'll need a separate screen just to track trade war headlines."
Frequently Asked Questions
Why is Trump targeting Greenland?
The Arctic territory has strategic value due to its location and potential mineral resources. TRUMP has reportedly been obsessed with purchasing it since 2019.
How will this affect US tech companies?
If the EU activates its anti-coercion tool, American tech giants could lose IP protections and face market access restrictions in Europe.
Is this worse than previous trade wars?
Potentially yes - the combination of higher tariff percentages, broader product coverage, and non-tariff retaliation tools creates unprecedented escalation risks.
