Stocks tumbled during afternoon trading on Wall Street on Tuesday following U.S. President Donald Trump’s warning to impose new tariffs on eight NATO members amidst escalating tensions over American influence on Greenland. The S&P 500 plummeted 2.1%, marking its most significant decline since October, in response to Trump’s actions, which coincided with U.S. markets reopening after the Martin Luther King Jr. Day closure. The Dow Jones Industrial Average dropped 877 points, a 1.8% decrease, by 2:46 p.m. ET, while the Nasdaq composite slid 2.4%. This decline extended to European and Asian markets.
Canada’s primary stock index, the S&P/TSX composite index, experienced a decline of 340.68 points to 32,750.28 due to widespread losses across various sectors. Notably, technology stocks, already influential in market direction due to their significant valuations, led the downturn, with retailers, banks, and industrial firms also experiencing sharp declines.
Key companies like Nvidia, Amazon, JPMorgan Chase, and Caterpillar saw decreases in their stock prices. On the other hand, consumer staples companies like Colgate-Palmolive and Campbell’s fared relatively better, with minor gains amid the market turmoil.
In the commodities market, the price of U.S. crude oil climbed 1.5% to $60.34 per barrel, while Brent crude, the global benchmark, rose 1.3% to $64.76 per barrel.
Trump’s recent tariff threats, targeting countries such as Denmark, Norway, and France, impacted European markets and led to higher Treasury yields in the bond market. The combined annual imports from European Union nations exceed those from top importers Mexico and China individually.
The tensions surrounding trade policies influenced precious metals, with gold and silver reaching record highs as investors sought safe havens amid geopolitical uncertainties. Gold surged by 3.7%, and silver saw a 6.9% increase. In the cryptocurrency market, bitcoin’s rally was interrupted by the trade disputes, with its value dropping from over $96,000 to around $89,300.
The bond market saw mixed movements, with the 10-year Treasury yield rising to 4.29% and the two-year Treasury yield slipping to 3.59%. Trump’s aggressive stance on Greenland, linked to his Nobel Peace Prize snub, has intensified the standoff between the U.S. and its allies, sparking diplomatic tensions across Europe.
As leaders in Europe consider countermeasures like retaliatory tariffs and the use of the EU’s anti-coercion instrument, the trade conflict escalates amidst the World Economic Forum gathering in Davos, Switzerland. Analysts anticipate that the impact of the tariff threats on the conference will diminish over time as negotiations unfold, easing tensions between Trump and EU leaders.
Since 2024, tariffs have been a looming issue affecting the U.S. and global economies. Trump’s tariff strategies have been characterized by ambiguity and unpredictability, causing challenges for businesses in planning ahead due to fluctuating threat levels. The potential for higher inflation resulting from tariff threats could complicate the Federal Reserve’s efforts, which have been cautious due to inflation exceeding the target rate of two percent.