European stock markets fell on Tuesday as US President Donald Trump renewed tariff threats, with luxury goods and automotive sectors hit hard. The French conglomerate LVMH dropped 4.45%, wiping billions off its market value, while Hermès International fell 2.9%. The European Stoxx 600 index was down 0.88%, though London’s FTSE 100 fared slightly better, declining 0.36%.
The sell-off follows Trump’s latest comments on tariffs, which have raised fears of a trade war. Mohit Kumar of Jefferies noted that markets have become used to “Taco” (Trump always chickens out) but cautioned that the Greenland dispute makes a resolution less likely. “Our base case is that the 1st February deadline will get postponed as diplomatic talks will start between the EU and the US,” he said, adding that Germany, Denmark and Sweden would be most affected due to their reliance on industrial, auto and pharmaceutical sectors.
In the UK, a union warned that a trade war would be a “wrecking ball” for manufacturing. The London Stock Exchange, meanwhile, celebrated new rules aimed at making it easier for businesses to raise capital, though the event was overshadowed by market jitters. Chancellor Rachel Reeves cancelled her attendance to appear at Prime Minister Keir Starmer’s press conference on Greenland.
The European Union is considering levying tariffs on €93bn of US goods, as political leaders oppose Trump’s attempt to annex Greenland. A joint statement from the UK, Denmark, Norway, Sweden, France, Germany, the Netherlands and Finland said: “Tariff threats undermine transatlantic relations and risk a dangerous downward spiral.”
George Saravelos of Deutsche Bank highlighted Europe’s leverage: “Europe is America’s largest lender: European countries own $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined.” He noted that Danish pension funds have already begun reducing dollar exposure, a trend that could accelerate.
