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Stocks fell in afternoon trading on Wall Street on Tuesday after US President Donald Trump threatened to hit eight NATO members with new tariffs amid rising tensions over US efforts to control Greenland.
The S&P 500 fell 2.1 percent on Tuesday, its biggest decline since October. It was the first time U.S. markets could have reacted to Trump’s escalation as they closed Monday for Martin Luther King Jr. Day.
The Dow Jones industrial average was down 877 points, or 1.8 percent, as of 2:46 p.m. The Nasdaq composite was down 2.4 percent. European and Asian markets also fell.
Canada’s main stock index was weighed down by broad-based losses. The S&P/TSX composite index fell 340.68 points to 32,750.28.
Wall Street’s losses were broad-based and led by technology stocks, many of which have more influence on the market’s direction at already overvalued valuations. Retailers, banks and industrial companies also fell sharply.
Nvidia, one of the world’s most valuable companies, fell 3.6 percent. Amazon fell 3.7 percent, JPMorgan Chase fell 2.9 percent, and Caterpillar lost three percent.
Companies focused on consumer staples fared better than most markets. Colgate-Palmolive rose 1.5 percent and Campbell’s rose 1.7 percent.
U.S. crude oil prices rose 1.5 percent to $60.34 a barrel. International Brent crude rose 1.3 percent to 64.76 US dollars.
The threat of Trump’s tariffs
Trump said Saturday that he would impose a 10 percent import tax on imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland starting in February. European markets also fell and Treasury yields rose in the bond market.
The combined annual imports from the EU countries are greater than the imports from the two largest individual countries, the US, Mexico and China.
Before US markets opened, markets in Paris, Frankfurt and London fell more than 1 percent for a second straight day of losses.
Silver and gold both hit record highs again as investors sought safety amid heightened geopolitical tensions. Gold rose 3.7 percent while silver rose 6.9 percent.
Trade tensions appear to have short-circuited bitcoin’s recent rally. The cryptocurrency rose above US$96,000 at the end of last week but has since fallen to around US$89,300.
Treasury yields are mixed in the bond market. The 10-year Treasury yield rose to 4.29 percent from 4.23 percent late Friday. The two-year Treasury yield fell to 3.59 percent from 3.60 percent late Friday.
In a text message released on Monday, Trump linked his aggressive stance on Greenland to the Nobel committee’s decision to link his Nobel Peace Prize last year to Norway’s prime minister “not only thinking about peace.” Although the committee is based in Norway, it is not a government body.
Trump’s message to Jonas Gahr Storter sparked a row between Washington and its closest allies over threats to take control of Greenland, a self-governing NATO member of Denmark.
Anger throughout Europe
Trump’s threat has sparked outrage and sparked diplomatic activity across Europe. Anti-coercion device.
Trade and political tensions with Europe are heating up as world leaders meet this week at the World Economic Forum’s annual meeting in Davos, Switzerland.
Dan Ives, an analyst at Wedbush Securities, said the threat of new tariffs was “clearly visible at the conference” but that it was likely to grow stronger over time.
“Our view is that the bite and tariff threats on this issue will be worse than last year, as negotiations continue and tensions between Trump and EU leaders finally calm,” Ives wrote in a note to clients.
Tariffs are looming over the US and global economies starting in 2024.
Trump’s tariff policy has been confusing and uncertain, involving threats or implementation of tariffs and frequent delays or cancellations. Existing tariffs have put additional pressure on higher prices on goods and the threat of more to come makes it difficult for businesses to plan ahead.
The threat of tariffs could further complicate the Federal Reserve’s job of reviving already high inflation. The US central bank has cut benchmark interest rates three times by 2025 to bolster the economy as the labor market weakens.
But he took a more cautious view because of concerns about rising inflation, which is above the Fed’s two percent target.