Stocks plummeted during afternoon trading on Wall Street Tuesday in response to U.S. President Donald Trump’s threat to impose new tariffs on eight NATO members amid mounting tensions over his efforts to assert American authority over Greenland. The S&P 500 experienced a significant 2.1% decline, marking its largest drop since October. This downturn followed the closure of U.S. markets on Monday for Martin Luther King Jr. Day, allowing the first reaction to Trump’s escalation. The Dow Jones Industrial Average also dropped by 877 points, equivalent to a 1.8% decrease, by 2:46 p.m. ET. Additionally, the Nasdaq composite witnessed a 2.4% decline, mirroring the downward trend in European and Asian markets.
Canada’s primary stock index was negatively impacted by widespread losses, with the S&P/TSX composite index dropping by 340.68 points to 32,750.28. Notably, the decline in Wall Street was broad-based, with technology stocks taking a significant hit due to their substantial market influence. Retailers, banks, and industrial firms also experienced sharp declines.
Prominent companies such as Nvidia, Amazon, JPMorgan Chase, and Caterpillar saw declines ranging from 2.9% to 3.7%. However, consumer staples-focused companies like Colgate-Palmolive and Campbell’s fared relatively better, with gains of 1.5% and 1.7%, respectively.
In the commodities market, the price of U.S. crude oil rose by 1.5% to $60.34 per barrel, while Brent crude, the global benchmark, increased by 1.3% to $64.76.
Trump’s announcement of a forthcoming 10% import tax on goods from several European countries, including Denmark, Norway, and Germany, stirred tension in European markets. The combined annual imports from European Union nations surpass those from top U.S. importers Mexico and China. Consequently, markets in Paris, Frankfurt, and London experienced over 1% declines, signaling a second consecutive day of losses.
Amid geopolitical uncertainties, silver and gold prices surged, with gold rising by 3.7% and silver by 6.9%. Bitcoin, which had rallied to over $96,000 last week, retreated to around $89,300 following the trade tensions.
The bond market saw mixed results, with the 10-year Treasury yield climbing to 4.29% and the two-year Treasury yield dipping to 3.59%. Trump’s Greenland-related tariff threats, linked to his Nobel Peace Prize snub, have intensified the rift with European allies and raised concerns about potential retaliatory measures.
The escalating trade disputes coincide with the World Economic Forum’s annual meeting in Davos, Switzerland, where world leaders are convening this week. Analysts expect negotiations to mitigate the impact of Trump’s tariff threats over time, despite the ongoing economic uncertainties. Tariffs have been a persistent concern for the global economy since 2024, posing challenges for businesses in planning and inflation management.
The unpredictability of Trump’s tariff policies, marked by fluctuating threats and implementations, has added pressure to prices and inflation. This uncertainty complicates economic planning and could further challenge the Federal Reserve’s efforts to manage inflation rates, which have remained above the target of two percent.