Global markets reacted nervously on Monday as US President Donald Trump reignited trade war fears by threatening to impose tariffs on several European nations over their opposition to the United States’ proposed acquisition of Greenland. Trump’s announcement sparked a sharp response from the affected countries, which warned that such measures would undermine transatlantic relations and risk a “dangerous downward spiral.”
The US president has been pushing for the acquisition of Greenland, citing national security needs, despite Denmark’s insistence that the autonomous territory is not for sale. Following failed talks, Trump announced that he would impose 10% tariffs on Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland from February 1, rising to 25% from June 1, if they did not agree to the takeover.
The move has put a trade deal signed between the US and the European Union last year at risk, with German Foreign Minister Johann Wadephul expressing doubts about the agreement’s feasibility in the current situation. French President Emmanuel Macron’s aides have indicated that he would ask the EU to activate an “anti-coercion instrument” against Washington if Trump follows through on his threat.
The prospect of a trade war between the global economic heavyweights has shaken markets, with safe-haven assets such as gold and silver hitting record highs. Gold peaked at $4,690.59, while silver struck $94.12. Equity markets in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, and Wellington retreated, while those in Seoul and Taipei made gains. European and US futures also sank.
The dollar retreated against its peers, with the euro, sterling, and yen all higher. According to Charu Chanana, chief investment strategist at Saxo Markets, the next signpost is whether Trump’s threats translate into policy, and the concrete dates matter. Chanana noted that the decision path on the European side is crucial, as there is a difference between merely mentioning the anti-coercion instrument as a signal and formally pursuing it as action.
The trade tensions have overshadowed data showing China’s economy expanded 5% last year, in line with its target, although growth in the final three months slowed sharply from the previous quarter. Investors in Seoul and Taipei brushed off a warning from US Commerce Secretary Howard Lutnick that South Korean chipmakers and Taiwan firms not investing in the US could face 100% tariffs unless they boost output in the country.
As the situation unfolds, market watchers will be closely monitoring the developments, with the global economy already facing numerous challenges. The potential escalation of trade tensions between the US and Europe could have far-reaching consequences, affecting not only the economies of the countries involved but also the global trade landscape.
