Stocks slumped in afternoon trading on Wall Street Tuesday after U.S. President Donald Trump threatened to hit eight NATO members with latest tariffs as tensions escalate over his attempts to say American control over Greenland.
The S&P 500 fell 1.2 per cent, pulling back farther from the record it set early last week. It was the primary time U.S. markets could react to the escalation from Trump, as they were closed on Monday for Martin Luther King Jr. Day.
The Dow Jones Industrial Average fell 526 points, or 1.1 per cent, as of 12:15 p.m. Eastern. The Nasdaq composite slumped 1.5 per cent.
Meanwhile, the Toronto Stock Exchange was down about half a per cent.
The losses were widespread and led by technology stocks, a lot of which have already got more influence over the direction of the market due to outsized values. Retailers, banks and industrial firms also fell sharply.
Nvidia, some of the useful firms on this planet, plunged 3.6 per cent. Amazon fell 2.2 per cent, JPMorgan Chase fell 1.2 per cent, and Caterpillar lost two per cent.
The energy sector eked out gains as the value of U.S. crude oil rose 1.9 per cent to USD$60.55 per barrel. The worth of Brent crude, the international standard, rose 1.6 per cent to $64.95. Exxon Mobil rose one per cent.
European markets and markets in Asia fell.
Trump said Saturday that he would charge a ten per cent import tax starting in February on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland.
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The annual combined imports from European Union nations are greater than those from the highest two biggest individual importers into the U.S., Mexico and China.
Gold prices surged 3.4 per cent and silver prices soared 5.7 per cent. Each reached for records. Such assets are sometimes considered protected havens in times of geopolitical turmoil.
The trade tensions apparently short-circuited a recent rally in bitcoin. The cryptocurrency rose above $96,000 late last week but has dropped back to around $90,300.
Treasury yields were mixed within the bond market. The yield on the 10-year Treasury rose to 4.27 per cent from 4.23 per cent late Friday. The yield on the two-year Treasury held regular at 3.60 per cent from late Friday.
Trump linked his aggressive stance on Greenland to last 12 months’s decision to not award him the Nobel Peace Prize, telling Norway’s prime minister that he now not felt “an obligation to think purely of Peace,” in a text message released Monday.
Trump’s message to Jonas Gahr Støre appeared to ratchet up a standoff between Washington and its closest allies over his threats to take over Greenland, a self-governing territory of NATO member Denmark.
Trump’s threats have sparked outrage and a flurry of diplomatic activity across Europe, as leaders consider possible countermeasures, including retaliatory tariffs and the first-ever use of the European Union’s anti-coercion instrument.
The trade and political conflict with Europe is heating up just as world leaders meet on the World Economic Forum annual meeting in Davos, Switzerland this week. Wedbush Securities analyst Dan Ives said the brand new tariff threat “is clearly an overhang on the conference,” but that it might likely simmer over time.
“Our view is identical to during the last 12 months the bark shall be worse than the bite on this issue and tariff threats as negotiations happen and tensions ultimately calm down between Trump and EU leaders,” Ives wrote in a note to clients.
Tariffs have been looming over the U.S. and global economies since 2024. Trump’s tariff policy has been confusing and unsure, involving the threat or implementation of tariffs after which often followed by delays or cancellations. Existing tariffs have added more pressure to already high prices on goods and the specter of more to return makes it difficult for businesses to plan ahead.
The specter of tariffs reigniting already high inflation could further complicate the Federal Reserve’s job. The central bank cut its benchmark rate of interest thrice late in 2025 to assist bolster the economy because the job market weakened. But, it has taken a more cautious view due to the risk of rising inflation, which stays above the Fed’s goal of two per cent.
Lower rates of interest on loans may also help bolster economic activity, but they might also fuel inflation, which could counter any profit from lower rates of interest.
The Fed, and Wall Street, will get one other update on inflation on Thursday, when the federal government releases the private consumption expenditures price index, or PCE. It’s the Fed’s preferred measure for inflation.
The Fed will meet next week for its policy meeting on rates of interest and Wall Street is betting that the central bank will hold its benchmark rate of interest regular.
Wall Street can be within the midst of the newest round of corporate earnings, which could help provide more insight into how firms are handling uncertainty from tariffs, geopolitics and cautious consumers.
Industrial and consumer conglomerate 3M slumped seven per cent after reporting mixed results for its most up-to-date quarter. United Airlines and Netflix will report their results after the market closes on Tuesday. Corporations from a wide selection of industries will report their results this week, including Johnson & Johnson, Halliburton and Intel.
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