Global stock markets are bracing for falls when trading resumes on Monday after Donald Trump threatened eight European countries with fresh tariffs until they support his ambition to acquire Greenland.
The US president’s plan to impose new trade levies of 10% on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland from 1 February, rising to 25% on 1 June, is creating fear in the markets, and among European businesses.
Trading on the brokerage IG’s weekend markets suggest there will be losses on the London Stock Exchange when it reopens on Monday, while rising geopolitical fears could drive precious metal prices towards new record highs. Wall Street, which reopens on Tuesday, is also on track for a fall.
“This latest flashpoint has heightened concerns over a potential unravelling of Nato alliances and the disruption of last year’s trade agreements with several European nations, driving risk-off sentiment in stocks and boosting safe-haven demand for gold and silver,” said Tony Sycamore, a market analyst at IG.
Britain’s FTSE 100 index was on track to fall by 0.9% on Monday, IG’s weekend market suggested, while its Weekend Wall Street market indicated a 0.5% fall on the Dow Jones industrial average, which tracks 30 large US companies.
Gold was trading 0.6% higher at $4,625 an ounce on IG’s weekend bullion market, nudging the record high of $4,642 an ounce hit last week, while spot silver was trading 0.5% higher at $90.41/oz.
European leaders, including the UK prime minister, Keir Starmer, and the European Commission president, Ursula von der Leyen, criticised Trump’s move on Saturday, which threatens to undermine the Nato defence alliance.
Trump’s new policy has “whipped up fresh economic chaos” and is a setback for the UK economy, said Susannah Streeter, the chief investment strategist at Wealth Club.
“This is a migraine-inducing development for politicians who have already had to go through tortuous negotiations to reach the first tranche of tariff deals, winning exemptions for certain sectors. For companies selling into the United States, and their customers, this move creates another layer of difficult decision making.
“Already they have had to try to absorb the current tariffs – there will be little room to soak up any more – so this new tranche of duties is likely to end up being passed on to American customers.”
There were signs on Sunday that European business groups were pushing the EU to flex its muscles in response. Germany’s engineering association, the VDMA, called on the European Commission to consider using its “anti-coercion instrument” against the US.
“If the EU gives in here, it will only encourage the US president to make the next ludicrous demand and threaten further tariffs,” the VDMA president, Bertram Kawlath, said in a statement on Sunday.
Hildegard Müller, the president of the German auto industry association, warned that the costs of these additional tariffs would be “enormous” for German and European industry.
William Bain, the head of trade policy at the British Chambers of Commerce, predicted that new tariffs on goods exported to the US would be “more bad news for UK exporters”, and he urged the UK government to push for last year’s trade deal with the US – which was frozen last month – to be implemented.
“We know trade is one way to boost the economy, and the success of transatlantic trade depends on reducing, not raising, tariffs. The government must prioritise the implementation of the [UK-US] economic prosperity deal and negotiate calmly to remove the threat of these new tariffs,” Bain said.