Tariff Threat Hits European Shares

 

 

“U.S. stock futures and European shares dropped, while gold and silver notched records after President Trump said he would place tariffs on several European countries for opposing his plan to take control of Greenland.

 

The Stoxx Europe 600 fell more than 1%. Trade-sensitive stocks, such as LVMH Moet Hennessy Louis Vuitton and BMW, bore the brunt of the selloff.

 

Early Tuesday, Japans Nikkei 225 was down 1.2% at the midday break.

 

Futures contracts tied to the S&P 500 and Nasdaq-100 were down about 1% Monday evening. In commodities trading, gold was trading at $4,672.50 a troy ounce, up 1.7%.

 

Stock and bond markets in the U.S. were closed for Martin Luther King Jr. Day.

 

In a social-media post on Saturday, Trump said 10% tariffs would kick in on Feb. 1 for all goods imported from Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands and Finland. He said the levies would increase to 25% in June and continue until a deal is reached "for the complete and total purchase of Greenland."

 

The move ratchets up the pressure in Trump's pursuit of the semiautonomous Danish territory -- and threatens to upend trade deals struck with the U.K. and European Union last year.

 

EU ambassadors held crisis talks on Sunday, considering potential responses including a never-before-used trade defense known as the "bazooka." The EU's executive arm said Monday that retaliatory tariffs on more than $100 billion of U.S. goods, which were put on hold in 2025, could come into effect as soon as Feb. 7.

 

Coming into this year, many investors believed "all the political upheaval, the political noise that characterized 2025" would diminish, said Seema Shah, chief global strategist at Principal Asset Management. "The last few days have put that into question."

 

Investors had adjusted to the idea of tariffs and viewed the outlook for trade relations as relatively stable, Shah added. "Now we see that tariffs can be used for pretty much any negotiation."

 

Traders returned to familiar playbooks: dumping stocks that would be stung by tariffs, and piling into investments -- and other asset classes -- that benefit from heightened geopolitical tensions. European defense stocks rallied, with Sweden's Saab and France's Dassault Aviation each rising more than 2%.

 

Automakers were among the hardest hit. In Germany, BMW, Porsche and Mercedes-Benz each slid more than 2%. Luxury-goods stocks, including LVMH and Kering, the parent of Gucci, also sold off.

 

Precious metals rallied, with gold and silver futures both jumping to new intraday highs. Gold rose more than 1.5% to trade as high as $4,698 a troy ounce. Silver surged more than 4%, topping $94 a troy ounce at one point.

 

Other haven assets, such as the Swiss franc, gained. The WSJ Dollar Index retreated.

 

Much remains uncertain about Trump's latest tariff threat. The president didn't detail whether the levies would be added on top of existing duties and it is unclear what legal authority Trump would use to enact the duties.

 

Wall Street strategists gamed out possible scenarios. Goldman Sachs economists said a new 10% levy would likely lower real gross domestic product by 0.1% to 0.2% in the affected countries, with "very small" inflation effects.

 

Others floated more-drastic risks. European countries could cut their huge holdings of U.S. assets, suggested George Saravelos at Deutsche Bank. He said Europe's $8 trillion of U.S. stocks and bonds amounted to nearly twice as much as the rest of the world combined.

 

"In an environment where the geoeconomic stability of the Western alliance is being disrupted existentially, it is not clear why Europeans would be as willing to play this part," Saravelos said.” [1]

 

1. Markets -- Monday's Markets: Tariff Threat Hits European Shares. McCabe, Caitlin.  Wall Street Journal, Eastern edition; New York, N.Y.. 20 Jan 2026: B9.