Key Points
- European stocks fell sharply on Monday after President Trump threatened new tariffs.
- The STOXX 600 had its biggest one-day drop in two months.
- Trump is threatening a 10% tariff on eight European countries over the Greenland dispute.
- The euro zone’s “fear index” jumped to its highest level since November.
European stock markets took their biggest one-day hit in two months on Monday after President Donald Trump threatened to slap new tariffs on eight European countries. The move, which is tied to Trump’s desire to buy Greenland, has reignited fears of a transatlantic trade war.
The pan-European STOXX 600 index fell 1.2%, with major markets in Germany and France both dropping by more than 1.3%. The sell-off was a direct reaction to Trump’s announcement that he would impose a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, starting on February 1. He said the tariffs would rise to 25% on June 1 if no deal is reached.
The sectors that are most exposed to international trade were hit the hardest. Luxury goods, automobile, and technology stocks all fell sharply. The euro zone’s “fear index,” a measure of market volatility, also jumped to its highest level since November.
“Trump’s actions over the weekend have inflamed geopolitical risks while also reintroducing trade uncertainty,” said one market analyst.
While the threats have rattled investors, some experts believe the European Union will be cautious in its response to avoid a further escalation. The whole situation is being closely watched as world leaders and corporate executives gather in Davos for the World Economic Forum.
There were a couple of bright spots in the market. The British insurer Beazley saw its stock skyrocket nearly 43% after Zurich Insurance announced a takeover bid. And the German pharmaceutical giant Bayer rose by more than 7% after the U.S. Supreme Court agreed to hear its case related to the Roundup weedkiller lawsuits.
