Wall Street sinks 2% on Trump tariff threat to 8 European nations

Stocks fell sharply on Wall Street on Tuesday, with the S&P 500 declining 2.1% to 6,796.86 after President Donald Trump threatened to impose a 10% tariff on imports from eight European nations including Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland.

Trump’s tariff threat has roiled financial markets since the start of his second term, with investors concerned that import duties could reignite inflation even as the Federal Reserve attempts to cool prices after cutting rates three times in late 2025.

Wall Street sank on Tuesday as President Donald Trump threatened to impose a 10% tariff on imports from eight European nations, escalating tensions with U.S. allies over his bid to assert American control over Greenland. Investors fled stocks across nearly every sector, with major indexes posting their steepest declines since October.

The S&P 500 fell 143.15 points, or 2.1%, to 6,796.86. The Dow Jones Industrial Average declined 870.74 points, or 1.8%, to 48,488.59. The Nasdaq composite fell 561.07 points, or 2.4%, to 22,954.32.

Technology stocks bore the heaviest losses. Nvidia, one of the world’s most valuable companies, fell 4.4%. Apple declined 3.5%. Retailers, banks, and industrial companies also fell sharply. Lowe’s fell 3.3%, JPMorgan Chase dropped 3.1%, and Caterpillar lost 2.5%.

Trump’s Tariff Threat

Trump said he would impose the 10% import tax starting in February on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland. Combined annual imports from these eight European nations exceed those from Mexico and China individually.

The tariff threat stems from Trump’s ongoing pursuit of Greenland, a self-governing territory of Denmark. Trump linked his aggressive stance on the island to his not receiving the Nobel Peace Prize last year. In a text message to Norway’s Prime Minister Jonas Gahr Støre released Monday, Trump wrote that he no longer felt “an obligation to think purely of Peace.”

Trump’s threats have sparked outrage across Europe. Leaders are considering countermeasures including retaliatory tariffs and, for the first time, the European Union’s anti-coercion instrument.

Global Markets React

European and Asian markets also fell on Tuesday. Long-term bond yields in Japan rose to record levels on fiscal concerns, adding to anxiety in global financial markets.

Investors sought safety in commodities. Gold prices surged 3.7% and silver soared 6.9%. Bitcoin, which had risen above $96,000 late last week, fell back to around $89,700. The yield on the 10-year Treasury rose to 4.29% from 4.23% late Friday, while the 2-year Treasury yield held at 3.60%. U.S. crude oil rose 1.5% to $60.34 per barrel, while Brent crude rose 1.5% to $64.92.

Consumer staples held up better than the broader market. Colgate-Palmolive rose 1.1% and Campbell’s rose 1.5%.

Trump’s trade policy has roiled markets since the start of his second term, with stocks selling off when he threatens tariffs, then rallying when he delays, cancels, or negotiates lower rates. Dan Ives, a Wedbush Securities analyst, said the tariff threat “is clearly an overhang on the conference,” referring to the World Economic Forum annual meeting in Davos, Switzerland, this week. Ives forecast that the “bark will be worse than the bite on this issue” and that “tensions ultimately calm down between Trump and EU leaders.”

Federal Reserve Policy and Outlook

Tariffs threaten to boost inflation, though price increases to date have been less severe than many experts feared. Still, a resurgence of inflation could complicate the Federal Reserve’s work.

The Fed cut its benchmark interest rate three times in late 2025 to support economic growth as the job market weakened. The central bank has grown more cautious because inflation remains above its 2% target.

On Thursday, the government will release the personal consumption expenditures price index, the Fed’s preferred inflation measure. The Federal Reserve meets next week to decide on interest rates, with Wall Street betting the central bank will hold its benchmark rate steady.

Wall Street is in the midst of earnings season. Industrial and consumer conglomerate 3M fell 7% after reporting mixed quarterly results. Companies including Johnson & Johnson, Halliburton, and Intel are scheduled to report earnings this week.