World markets face fresh jolt as Trump vows tariffs on Europe over Greenland
Written by: Karin Strohecker and Dhara Ranasinghe
LONDON, Jan 18 (Reuters) – Global markets faced a fresh wave of volatility this week after President Donald Trump said he would impose tariffs on eight European countries until the United States is allowed to buy Greenland.
Trump said that he will impose an additional 10% import tax on goods coming from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the UK as of February 1, and if no agreement is reached, this rate will increase to 25% on June 1.
“Hopes that the tariff situation has calmed down for this year have been dashed for now and we find ourselves in the same situation as last spring,” said Berenberg chief economist Holger Schmieding.
The removal of tariffs on “Liberation Day” in April 2025 sent shockwaves through financial markets. Investors largely ignored Trump’s trade threats in the second half of the year, dismissing them as noise, and responded with relief as Trump struck deals with countries like the United Kingdom and the European Union.
Although this recession is over, the experience that investor sentiment is more resilient and global economic growth remains on track could weaken Monday’s market moves.
However, Schmieding predicted that the euro could come under some pressure when Asian trading begins. The euro closed around $1.16 against the dollar on Friday, reaching its lowest levels since late November.
The implications for the dollar were less clear. It remains a safe haven, but it may also feel the impact of Washington being at the center of geopolitical ruptures, as it was last April.
“For European markets this will be a small setback, but nothing comparable to the Liberation Day reaction,” Schmieding said.
European stocks are trading near record highs; Germany’s DAX and London’s leading FTSE indexes are up more than 3% since the beginning of the year, outperforming the S&P 500, which is up 1.3%.
European defense stocks look set to remain outliers, benefiting from rising geopolitical tensions. Defense stocks are up nearly 15% this month as the U.S. capture of Venezuelan Nicolas Maduro raises concerns about Greenland.
Denmark’s closely held crown is also likely to be in focus. It is weakening, but exchange rate differences are an important factor and it is still close to the central rate pegged to the euro. It’s not far from six-year lows against the euro.
“The US-EU trade war has started again,” said Tina Fordham, founder of Fordham Global Foresight and geopolitical strategist.
Trump’s latest move came as senior officials from the EU and South American bloc Mercosur signed a free trade agreement.
