Stocks in Europe weakened, while the price of gold – a safe-haven asset – reached a new peak after US President Donald Trump threatened tariffs on European allies until a deal was reached for the US purchase of Greenland.
In the United States, where markets are closed Monday, Dow futures were 0.9% down, while S&P 500 futures dropped by a steeper 1.2%.
The US president announced Saturday that he would impose a 10% tariff from February 1 on goods from eight European countries. Trump didn’t specify whether the tariff would be on top of what they’re already paying.
In response, the European Union is considering imposing €93 billion ($108 billion) of previously announced retaliatory tariffs against the United States. French President Emmanuel Macron has also reportedly called for the activation of the EU’s so-called anti-coercion instrument. Colloquially known as a “trade bazooka,” the instrument could block some of America’s access to EU markets or result in export controls, among other potential measures.
“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,” Jonas Goltermann, a senior markets economist at consultancy Capital Economics, said in a note Monday.
“As such, the more likely outcome, in our view, is that both sides recognise 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.”
