U.S. Tariff Threats on Europe Spark Market Selloff as Gold Hits Record High
Global markets opened the week under heavy pressure after U.S. President Donald Trump threatened new tariffs on several European countries, reigniting fears of a fresh transatlantic trade war and pushing investors toward safe-haven assets.
U.S. stock futures led global equities sharply lower early Monday, while gold and silver surged to record highs as traders fled risk. The renewed volatility follows Trump’s weekend announcement that he plans to impose new tariffs on European imports as part of his escalating pressure campaign on Denmark over Greenland.
“President Trump’s actions over the weekend have inflamed geopolitical risks while also reintroducing trade uncertainty,” said Kyle Rodda, senior financial market analyst at Capital.com.
E-mini S&P 500 futures fell about 1%, while Hong Kong’s Hang Seng index dropped 1% and Europe’s STOXX 600 slid more than 1% shortly after the open. U.S. cash markets were closed for Martin Luther King Jr. Day.
Investors Rush to Safe Havens as Gold and Silver Break Records
Heightened uncertainty triggered a sharp move into perceived safe-haven assets. Gold futures surged above $4,670 an ounce for the first time on record, while silver jumped past $94 an ounce to a new all-time high. Meanwhile, Germany’s 10-year government bond yield — the euro zone benchmark — fell around 2 basis points, reflecting strong demand for bonds.
Trump Targets Eight European Nations With New Tariffs
On Saturday, Trump said the U.S. would impose 10% tariffs on imports from eight European countries starting February 1. The affected countries include Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland.
Trump added that the tariff rate would rise to 25% on June 1 “until such time as a deal is reached for the complete and total purchase of Greenland,” according to a post on Truth Social.
The move has alarmed European officials, who are reportedly preparing countermeasures that could include up to €93 billion in tariffs on U.S. goods or restrictions on American companies’ access to European markets.
Fears of Escalating Trade War Hit Global Markets
Investors worry that a tit-for-tat response would significantly worsen relations between two of the world’s largest trading partners. In 2024, the U.S. imported roughly $350 billion worth of goods from the eight countries now targeted by Trump.
According to Holger Schmieding, chief economist at Berenberg, a 10% tariff on those imports could raise U.S. consumer prices by up to 0.15%.
“However, Trump’s threat puts the entire U.S.-EU tariff agreement at risk,” Schmieding said. “In the unlikely case that the agreement is not implemented, the damage to U.S. consumers could end up being almost three times as bad.”
Europe May Use Anti-Coercion Law to Retaliate
One possible response from Europe is the use of the European Union’s Anti-Coercion Instrument, a legal framework designed to counter economic pressure from third countries.
“This could result in retaliatory tariffs — potentially against U.S. Big Tech companies — as well as investment restrictions,” said Ipek Ozkardeskaya, senior analyst at Swissquote. “That may explain why tech-heavy Nasdaq futures are under heavier pressure than the Dow this morning.”
Precious Metals Strengthen as Uncertainty Grows
Market strategists said the renewed trade and geopolitical uncertainty is reinforcing the bullish case for precious metals.
“Some participants may seek to take profits on long risk positions or buy downside protection, but all of this further strengthens what is already a very strong bull case for gold and silver,” said Michael Brown, senior research strategist at Pepperstone.
Markets See Familiar ‘Escalate to De-Escalate’ Pattern
Still, some analysts believe markets may be witnessing a familiar pattern in Trump’s negotiating style.
“This should be seen as the beginning of a now-familiar ‘escalate to de-escalate’ cycle that ultimately ends in some sort of deal,” said strategists at Evercore ISI led by Sarah Bianchi.
Trump is expected to meet European leaders later this week at the World Economic Forum in Davos. Meanwhile, markets are also awaiting a U.S. Supreme Court ruling on the legality of Trump’s use of the International Emergency Economic Powers Act to justify his tariff strategy.
Defense Stocks Buck the Downtrend
Despite the broader market selloff, European defense stocks moved higher on expectations of increased regional military spending. Shares of Germany’s Rheinmetall, Britain’s BAE Systems, and France’s Thales all traded higher, defying the negative market mood.
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