Stocks took a dive in the afternoon trading session on Wall Street on Tuesday following U.S. President Donald Trump’s threat to impose new tariffs on eight NATO members amid escalating tensions over his push for American control of Greenland. The S&P 500 plummeted by 2.1%, marking its most significant decline since October. This was the first opportunity for U.S. markets to respond to Trump’s escalation as they were closed on Monday for Martin Luther King Jr. Day. The Dow Jones Industrial Average saw an 877-point drop, equivalent to a 1.8% decrease, as of 2:46 p.m. ET, while the Nasdaq composite also slipped by 2.4%. European and Asian markets mirrored the downturn.
Canada’s primary stock index was dragged down by widespread losses, with the S&P/TSX composite index shedding 340.68 points to reach 32,750.28. The decline on Wall Street was broad-based, with technology stocks leading the losses due to their substantial market influence. Retailers, banks, and industrial companies also experienced sharp declines.
Key companies like Nvidia, Amazon, JPMorgan Chase, and Caterpillar recorded notable drops. Conversely, firms focusing on consumer staples, such as Colgate-Palmolive and Campbell’s, managed to fare better during the market turmoil.
The price of U.S. crude oil climbed by 1.5% to $60.34 per barrel, while Brent crude, the global benchmark, rose by 1.3% to $64.76. Trump’s recent tariff threats involved implementing a 10% import tax on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland starting in February. This announcement triggered market reactions in Europe, with Treasury yields showing an uptick in the bond market.
The annual combined imports from European Union nations surpass those from the top two individual importers into the U.S., Mexico, and China. Before the opening of U.S. markets, significant stock exchanges in Paris, Frankfurt, and London experienced declines exceeding 1%, putting them on track for a second consecutive day of losses. Heightened geopolitical tensions prompted surges in silver and gold prices as investors sought safe-haven assets. Gold surged by 3.7%, while silver soared by 6.9%.
The escalating trade tensions seemed to impact the recent rally in bitcoin, which hit over $96,000 late last week but retreated to around $89,300. Treasury yields exhibited mixed movements in the bond market, with the 10-year yield rising to 4.29% and the two-year yield slipping to 3.59%.
Trump’s aggressive stance on Greenland was linked to his discontent over not receiving the Nobel Peace Prize last year, as he conveyed in a text message to Norway’s prime minister. The message heightened tensions between Washington and its allies regarding Trump’s ambitions to assert control over Greenland, a self-governing territory under Denmark’s NATO umbrella.
Trump’s tariff threats have sparked outrage across Europe, prompting leaders to contemplate potential countermeasures, including retaliatory tariffs and the utilization of the European Union’s anti-coercion instrument. The trade and political discord with Europe intensifies as global leaders convene at the World Economic Forum in Davos, Switzerland.
Analysts anticipate that the tariff threat could cast a shadow over the conference but predict that tensions will ease over time through negotiations. Tariffs have been a lingering concern for the U.S. and global economies since 2024, with Trump’s tariff policy characterized by unpredictability and ambiguity. The uncertainty surrounding tariffs adds pressure to already elevated prices on goods, making it challenging for businesses to strategize effectively. The looming threat of tariffs reigniting inflation poses a further challenge to the Federal Reserve in managing the economy amid concerns of rising inflation rates above the target of 2%.
