Trump's Greenland tariff threats trigger sharp US futures drop

Tuesday 20 January 2026 - 12:50

By: Dakir Madiha

Trump's Greenland tariff threats trigger sharp US futures drop

US stock futures plunged sharply on Tuesday as President Donald Trump escalated trade tensions with European NATO allies by threatening new tariffs linked to his push to acquire Greenland. Dow Jones Industrial Average futures tumbled 600 to 750 points, reflecting a drop of 1.3% to 1.5%, while S&P 500 futures fell 1.4% to 1.6% and Nasdaq 100 futures sank 1.7% to 2.0%. Markets had been closed Monday for Martin Luther King Jr. Day, allowing investors their first chance to react to the weekend developments.

European markets bore the brunt of the fallout. The Stoxx 600 index dropped 1.2% on Monday, its steepest single-day decline in two months, and slid another 0.7% Tuesday. Automakers and luxury goods firms, heavily exposed to US consumers, suffered the most: Mercedes-Benz shares plunged 6.7%, BMW lost up to 7%, and Volkswagen shed over 5%. Luxury powerhouse LVMH tumbled 4.69%, with Hermès and Kering each down more than 3.9%.

Trump's Saturday announcement targeted Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland with tariffs starting at 10% on February 1, rising to 25% by June 1, unless a deal is reached for the "full and total" purchase of Greenland. European leaders branded the move "unacceptable," with the European Union considering retaliatory tariffs worth up to 93 billion euros and potential activation of its anti-coercion instrument.

Bond yields climbed as investors dumped US Treasuries, stocks, and the dollar in a "Sell America" pivot. The 10-year Treasury yield rose about 6 basis points to 4.29%, its highest since September, while the 30-year yield jumped 9 basis points to 4.93%. Gold surged to new all-time highs above $4,700 per ounce, hitting around $4,716, with silver also reaching record levels as safe-haven demand spiked.

Treasury Secretary Scott Bessent downplayed fears of a prolonged trade war, calling the tariffs a "strategic use" of economic power. Trump is set to speak at the World Economic Forum in Davos, Switzerland, on Wednesday, where he may address purchasing power issues. The US Supreme Court could rule this week on the legality of Trump's use of the International Emergency Economic Powers Act for tariffs, a decision Bessent expects to favor the administration. Analysts urged caution, with Capital Economics' Jonas Goltermann noting that both sides recognize a major escalation would be lose-lose.