Jan 20 (Reuters) – U.S. stocks opened sharply lower on Tuesday as investors reacted to fresh trade tensions sparked by President Donald Trump’s weekend threat to impose new tariffs on several European allies. The move, tied to his renewed push to acquire Greenland, unsettled global markets and added another layer of uncertainty to an already cautious trading environment.
Wall Street began the session firmly in the red, reflecting concern that the dispute could escalate into a broader transatlantic trade conflict. The S&P 500 dropped around 90 points shortly after the opening bell, sliding roughly 1.3%. The Dow Jones Industrial Average fell more than 600 points, a decline of about 1.2%, while the Nasdaq Composite, heavily weighted toward technology stocks, sank around 1.6%. The selloff was broad based, with losses spread across industrials, technology, financials, and consumer discretionary shares.
The negative sentiment was not confined to the United States. Major European markets also extended losses for a second consecutive day. Indexes in Paris, Frankfurt, and London were all down more than 1% during midday trading, signaling deep investor unease over the possibility of retaliatory measures and long term damage to trade relations between the United States and Europe.
The market turbulence followed comments President Trump made over the weekend on his Truth Social platform. In those posts, he warned that the United States would impose a 10% tariff on goods imported from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland starting in February. He added that the tariff rate would rise to 25% beginning June 1 and would remain in place until a deal was reached allowing the United States to purchase Greenland. Greenland is a self governing territory that remains under the sovereignty of Denmark, which is also a member of NATO.
The European Union represents one of the largest sources of imports into the United States, with annual shipments exceeding those from Mexico and China combined. Because of that scale, analysts warned that any sustained disruption in trade flows could have meaningful consequences for prices, supply chains, and corporate earnings on both sides of the Atlantic. Several market strategists noted that even the threat of higher tariffs can weigh heavily on investor confidence, especially at a time when global growth is already showing signs of slowing.
President Trump further fueled controversy by linking his hard line on Greenland to his disappointment over not receiving the Nobel Peace Prize last year. According to a text message released on Monday, Trump told Norwegian Prime Minister Jonas Gahr Støre that he no longer felt “an obligation to think purely of peace.” Norway plays a key role in awarding the Nobel Peace Prize, and the message was widely seen in Europe as an unusually personal and confrontational escalation.
The comments intensified an already delicate standoff between Washington and several of its closest allies. European leaders responded with strong public statements rejecting the idea of selling Greenland and emphasizing the principle of national sovereignty. Diplomats across the continent began discussing potential countermeasures, including retaliatory tariffs and, for the first time, the possible use of the European Union’s anti coercion instrument, a policy framework created to counter economic pressure imposed by other countries.
By midday in Europe, the impact was clearly visible in equity markets. France’s CAC 40 was down about 1.2%, Germany’s DAX had fallen roughly 1.5%, and Britain’s FTSE 100 was lower by around 1.3%. Investors moved away from risk assets, favoring safer holdings amid fears that political rhetoric could quickly translate into real economic consequences.
Attention also turned to the annual World Economic Forum in Davos, Switzerland, where global political and business leaders gathered as the market turmoil unfolded. Speaking on the sidelines of the meeting, U.S. Treasury Secretary Scott Bessent sought to reassure audiences that relations between the United States and Europe remained fundamentally strong. He encouraged trading partners to remain calm and allow the situation to develop, suggesting that negotiations could eventually ease tensions.
Market participants in Davos echoed the sense that geopolitics would dominate discussions. Michael Brown, a senior research strategist at Pepperstone, said that investors were closely watching for any meetings or comments that could hint at de escalation. He noted that uncertainty around trade policy tends to amplify volatility, especially during periods when markets are already sensitive to economic data and central bank signals.
Some analysts attempted to strike a more measured tone. Dan Ives of Wedbush Securities wrote in a note to clients that while the tariff threat was clearly hanging over the conference and the markets, similar episodes in the past had often resulted in more moderate outcomes. In his view, the rhetoric could eventually give way to negotiations, reducing the long term impact on equities once tensions cool.
Beyond geopolitics, investors are also bracing for a busy week of economic news. Several major U.S. companies are set to report earnings, offering fresh insight into how higher borrowing costs and slower demand are affecting corporate performance. Markets are also awaiting the latest reading of the personal consumption expenditures index, the inflation gauge most closely watched by the Federal Reserve when setting monetary policy.
The Fed’s next policy meeting is scheduled for two weeks from now, and expectations are that officials will keep interest rates unchanged. Policymakers continue to walk a fine line, balancing signs of a cooling labor market against inflation that remains above the central bank’s long term target. Elsewhere, the Bank of Japan is holding a policy meeting later this week, adding another focal point for global investors.
In commodities markets, oil prices edged higher despite the broader risk off mood. U.S. benchmark crude rose by about 52 cents to just under $60 a barrel, while Brent crude gained around 51 cents to trade above $64 a barrel. Analysts attributed the gains to supply considerations and ongoing geopolitical uncertainty.
Precious metals saw even stronger moves as investors sought safe havens. Gold surged to a fresh record, climbing roughly 3% to around $4,733 an ounce. Silver also jumped sharply, rising more than 7% to approximately $95.30 an ounce. Traders said the rally reflected growing demand for assets perceived as protection against political instability and market volatility.