Stocks tumbled during afternoon trading on Wall Street on Tuesday following U.S. President Donald Trump’s announcement of potential tariffs on eight NATO member countries amidst rising tensions over his pursuit of control over Greenland. The S&P 500 experienced a significant drop of 2.1%, marking its largest decline since October. This reaction came after U.S. markets reopened following closure on Monday for Martin Luther King Jr. Day. The Dow Jones Industrial Average fell by 877 points, equivalent to a 1.8% decrease, as of 2:46 p.m. ET, while the Nasdaq composite also saw a substantial decline of 2.4%. Markets in Europe and Asia similarly experienced declines.
In Canada, the primary stock index, the S&P/TSX composite index, was negatively impacted by widespread losses, dropping by 340.68 points to 32,750.28. The decline in Wall Street was predominantly driven by technology stocks, which hold significant influence due to their substantial market values. Retailers, banks, and industrial companies also recorded sharp declines.
Notable companies such as Nvidia, Amazon, JPMorgan Chase, and Caterpillar witnessed declines ranging from 2.9% to 3.7%. Conversely, consumer staples-focused companies like Colgate-Palmolive and Campbell’s fared relatively better, with modest increases in their stock values.
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 per barrel.
Trump’s announcement of imposing a 10% import tax on goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland in February led to further market unease. This decision impacted European markets and caused Treasury yields to rise in the bond market. The aggregated imports from European Union countries surpass those from the top two individual U.S. importers, Mexico and China.
European markets, including Paris, Frankfurt, and London, experienced declines exceeding 1% before the U.S. market opened, indicating a potential second consecutive day of losses. Amid escalating geopolitical tensions, investments in precious metals surged, with gold rising by 3.7% and silver by 6.9%. The trade tensions also affected the cryptocurrency market, with bitcoin witnessing a drop from above $96,000 to around $89,300.
Trump’s recent aggressive stance on Greenland, following his dispute with the Nobel Committee over the Peace Prize, has intensified tensions with key allies. The ongoing diplomatic fallout across Europe has prompted discussions on potential countermeasures, including retaliatory tariffs and the utilization of the European Union’s anti-coercion instrument. The timing of these trade disputes coincides with the World Economic Forum annual meeting in Davos, Switzerland, where global leaders are convening this week.
Market analysts anticipate that the tariff threats could impact the ongoing conference but believe that negotiations and tensions may ease over time. The uncertainty surrounding Trump’s tariff policies, characterized by threats, implementations, delays, and cancellations, has created challenges for businesses in planning for the future. The existing tariffs, combined with the looming threat of additional tariffs, have added pressure to already high prices on goods, potentially fueling inflation concerns and complicating the Federal Reserve’s efforts to manage the economy effectively.
