Wall Street suffered its worst day since October on Tuesday, with the S&P 500 closing down 2.1% and the Dow Jones falling 1.8%, as investor fears over Donald Trump's tariff threats against eight European countries intensified. The tech-heavy Nasdaq dropped 2.4%, with Amazon down 2.9% and Tesla and Nvidia both losing over 3%, wiping billions off their market values.
The sell-off followed Trump's threat to impose tariffs on imports from Germany, France, Denmark, the UK, Sweden, the Netherlands, Norway and Finland, linked to his push for US control of Greenland. The UK's FTSE 100 fell 0.7%, while France's CAC dropped 0.6%, Germany's DAX fell 1%, and Italy's FTSE MIB lost 1.1%.
US Commerce Secretary Howard Lutnick, speaking at the World Economic Forum in Davos, downplayed the likelihood of a trade war, calling the Greenland dispute a 'kerfuffle' and suggesting diplomacy would prevail. However, he defended tariffs as a negotiating tool, stating, 'Globalisation has failed the west and the United States of America.'
UK Chancellor Rachel Reeves urged de-escalation, telling Bloomberg, 'The future of Greenland is for the people of Greenland.' US Treasury Secretary Scott Bessent also urged European countries not to retaliate, advising them to 'sit back, take a deep breath, and let things play out.'
Despite these reassurances, market analysts remained cautious. Kathleen Brooks of XTB said, 'This is a man-made crisis... the continued sell-off suggests that US threats to Greenland and their effects on financial markets could have further to go.' Gold and silver hit record highs as investors sought safe havens, with gold surpassing $4,700 an ounce.
