World markets jolted as Trump vows tariffs on Europe
Global markets are facing volatility 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 percent import tax on goods coming from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom as of February, and if no agreement is reached, this rate will increase to 25 percent in June.
Leading European Union countries on Sunday condemned tariff threats against Greenland as blackmail. France proposed to respond with a series of economic countermeasures that had not been tried before.
The euro rose 0.26 percent to $1.1628 after falling to its lowest level since November as investors broadly sold the dollar, lifting other major rival currencies.
In European markets, EUROSTOXX 50 futures and DAX futures fell 1.1 percent. Japan’s Nikkei index fell one percent as risk aversion prevailed.
“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 (northern) spring,” said Berenberg chief economist Holger Schmieding.
Trump’s sweeping “Liberation Day” tariffs in April 2025 sent shockwaves through the markets. Investors largely ignored US trade threats in the second half of the year, dismissing them as noise and responding with relief when Trump struck deals with the UK, EU and others.
Although this recession is over, Monday’s market movements may weaken as investor sentiment is more resilient than expected in 2025 and global economic growth remains on track.
US markets Martin Luther King Jr. on Monday. It’s closed for the day, meaning a delayed reaction on Wall Street. U.S. stock futures fell 0.7 percent in early Asian trading. Cash Treasury market closed, but 10-year futures rose slightly.
Although the US Dollar was significantly lower on Monday, the consequences 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.
The dollar’s weakness supported the safe-haven yen and Swiss franc. Bitcoin, a liquid proxy for risk, fell almost three percent to $92,602.64.
“While we claim that tariffs are threatening Europe, the dollar is actually bearing the brunt of this because I think markets are pricing in the rising political risk premium on the US dollar,” said Khoon Goh, ANZ’s head of Asia research.
Capital Economics noted that the countries most exposed to increased US tariffs are Britain and Germany, estimating that a 10 percent tax could reduce gross domestic product in these economies by about 0.1 percent, while a 25 percent tax could reduce output by 0.2 percent to 0.3 percent.
European stock markets are near record levels. Germany’s DAX and London’s FTSE index are up more than 3 percent this month, outperforming the S&P 500, which is up 1.3 percent.
Denmark’s closely held crown is also likely to be in focus. It has weakened, but rate differentials are a major factor and the euro remains close to the central rate at which it is pegged and not far from six-year lows.
“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.
Trump also considered intervening in unrest in Iran; The threat to impeach Federal Reserve Chairman Jerome Powell has reignited concerns about the independence of the US central bank.
Against this backdrop, safe-haven gold rose, rising more than one percent to a record high of $4,689.39 per ounce on Monday. The yellow metal rose almost 8 percent in January, following a 64 percent gain last year.
Kallum Pickering, chief economist at Peel Hunt, said an escalation of tensions in Europe could increase pressure on the dollar if it raises concerns that the credibility of US policy has been critically weakened, given Trump’s recent Fed attacks.
The World Economic Forum’s annual risk perception survey, released ahead of its annual meeting in Davos next week, which Trump will attend, found economic conflict between countries to be the number one concern, displacing armed conflict.
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