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Stocks sank in afternoon trading on Wall Street Tuesday after U.S. President Donald Trump threatened to hit eight NATO members with new tariffs as tensions escalate over his attempts to assert American control over Greenland.
The S&P 500 fell 2.1 per cent Tuesday, its biggest drop since October. It was the first time U.S. markets could react to the escalation from Trump, as they were closed on Monday for Martin Luther King Jr. Day.
The Dow Jones Industrial Average fell 877 points, or 1.8 per cent, as of 2:46 p.m. ET. The Nasdaq composite slumped 2.4 per cent. European and Asian markets also fell.
Canada’s main stock index was weighed down by broad-based losses. The S&P/TSX composite index was down 340.68 points to 32,750.28.
The Wall Street losses were widespread and led by technology stocks, many of which already have more influence over the direction of the market because of outsized values. Retailers, banks and industrial companies also fell sharply.
Nvidia, one of the most valuable companies in the world, plunged 3.6 per cent. Amazon fell 3.7 per cent, JPMorgan Chase fell 2.9 per cent, and Caterpillar lost three per cent.
Companies that focus on consumer staples held up better than most of the market. Colgate-Palmolive rose 1.5 per cent and Campbell’s rose 1.7 per cent.
The price of U.S. crude oil rose 1.5 per cent to $60.34 US per barrel. The price of Brent crude, the international standard, rose 1.3 per cent to $64.76 US.
Trump’s tariff threats
Trump said Saturday that he would charge a 10 per cent import tax starting in February on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland. European markets also fell and Treasury yields moved higher in the bond market.
The annual combined imports from European Union nations are greater than those from the top two biggest individual importers into the U.S., Mexico and China.
Before U.S. markets opened, markets in Paris, Frankfurt and London all fell more than one per cent and were on track for a second straight day of losses.
Silver and gold both rose to records again as investors sought safety amid heightened geopolitical tensions. Gold surged 3.7 per cent while silver soared 6.9 per cent.
The trade tensions apparently short-circuited a recent rally in bitcoin. The cryptocurrency rose above $96,000 US late last week but has dropped back to around $89,300.
Treasury yields were mixed in the bond market. The yield on the 10-year Treasury rose to 4.29 per cent from 4.23 per cent late Friday. The yield on the two-year Treasury slipped to 3.59 per cent from 3.60 per cent late Friday.
Trump linked his aggressive stance on Greenland to last year’s decision, by the Nobel Committee, not to award him the Nobel Peace Prize, telling Norway’s prime minister that he no longer felt “an obligation to think purely of Peace,” in a text message released Monday. The committee is based in Norway but is not part of its government.
Trump’s message to Jonas Gahr Støre appeared to ratchet up a standoff between Washington and its closest allies over his threats to take over Greenland, a self-governing territory of NATO member Denmark.
Outrage across Europe
Trump’s threats have sparked outrage and a flurry of diplomatic activity across Europe, as leaders consider possible countermeasures, including retaliatory tariffs and the first use of the European Union’s anti-coercion instrument.
The trade and political conflict with Europe is heating up just as world leaders meet at the World Economic Forum annual meeting in Davos, Switzerland, this week.
Trump’s threats have sparked outrage and a flurry of diplomatic activity across Europe, as leaders consider possible countermeasures, including retaliatory tariffs and the first-ever use of the European Union’s anti-coercion instrument. (Allison Robbert/Getty Images)
Wedbush Securities analyst Dan Ives said the new tariff threat “is clearly an overhang on the conference,” but that it would likely simmer over time.
“Our view is just like over the last year the bark will be worse than the bite on this issue and tariff threats as negotiations take place and tensions ultimately calm down between Trump and EU leaders,” Ives wrote in a note to clients.
Tariffs have been looming over the U.S. and global economies since 2024.
Trump’s tariff policy has been confusing and uncertain, involving the threat or implementation of tariffs and then often followed by delays or cancellations. Existing tariffs have added more pressure to already high prices on goods and the threat of more to come makes it difficult for businesses to plan ahead.
The threat of tariffs reigniting already high inflation could further complicate the Federal Reserve’s job. The U.S. central bank cut its benchmark interest rate three times late in 2025 to help bolster the economy as the job market weakened.
But it has taken a more cautious view because of the risk of rising inflation, which remains above the Fed’s target of two per cent.
