U.S. Stock futures dropped late Monday after global equities sold off as President Donald Trump launches a trade war against NATO allies over his Greenland ambitions.
Futures tied to the Dow Jones industrial average sank 401 points, or 0.81%. S&P 500 futures were down 0.91%, and Nasdaq futures sank 1.13%.
Markets in the U.S. Were closed in observance of the Martin Luther King Jr. Day holiday. Earlier, the dollar dropped as the safe haven status of U.S. Assets was in doubt, while stocks in Europe and Asia largely retreated.
On Saturday, Trump said Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will be hit with a 10% tariff starting on Feb. 1 that will rise to 25% on June 1, until a “Deal is reached for the Complete and Total purchase of Greenland.”
The announcement came after those countries sent troops to Greenland last week, ostensibly for training purposes, at the request of Denmark. But late Sunday, a message from Trump to European officials emerged that linked his insistence on taking over Greenland to his failure to be award the Nobel Peace Prize.
The geopolitical impact of Trump’s new tariffs against Europe could jeopardize the trans-Atlantic alliance and threaten Ukraine’s defense against Russia.
But Wall Street analysts were more optimistic on the near-term risk to financial markets, seeing Trump’s move as a negotiating tactic meant to extract concessions.
Michael Brown, senior research strategist at Pepperstone, described the gambit as “escalate to de-escalate” and pointed out that the timing of his tariff announcement ahead of his appearance at the Davos World Economic Forum this week is likely not a coincidence.
“I’ll leave others to question the merits of that approach, and potential longer-run geopolitical fallout from it, but for markets such a scenario likely means some near-term choppiness as headline noise becomes deafening, before a relief rally in due course when another ‘TACO’ moment arrives,” he said in a note on Monday, referring to the “Trump always chickens out” trade.
Similarly, Jonas Goltermann, deputy chief markets economist at Capital Economics, also said “cooler heads will prevail” and downplayed the odds that markets are headed for a repeat of last year’s tariff chaos.
In a note Monday, he said investors have learned to be skeptical about all of Trump’s threats, adding that the U.S. Economy remains healthy and markets retain key risk buffers.
“Given their deep economic and financial ties, both the US and Europe have the ability to impose significant pain on each other, but only at great cost to themselves,” Goltermann added. “As such, the more likely outcome, in our view, is that both sides recognize that a major escalation would be a lose-lose proposition, and that compromise eventually prevails. That would be in line with the pattern around most previous Trump-driven diplomatic dramas.”
