Stock markets fell on both sides of the Atlantic on Tuesday, with Wall Street suffering its worst day since October, as investor concerns persisted over the fallout from Donald Trump’s push for US control of Greenland.
The sell-off hit US stocks on the first day of trading in New York since Trump threatened new tariffs on eight European countries, after the market was closed for a public holiday on Monday. The S&P 500 closed down 2.1% while the Dow Jones finished down 1.8%.
The tech-heavy Nasdaq index fell 2.4%, with Amazon down 2.9% and Tesla and Nvidia both off more than 3%, wiping billions of dollars off their market values.
The UK’s FTSE 100 index dropped 0.7% on Tuesday, after a smaller fall on Monday.
In Europe, France’s CAC was down 0.6%, Germany’s DAX fell 1% and Italy’s FTSE MIB was off 1.1%.
The dollar was down 0.9% against a basket of currencies.
Trump’s threat to increase tariffs on US imports of goods from Germany, France, Denmark, the UK, Sweden, the Netherlands, Norway and Finland have renewed economic uncertainty.
Howard Lutnick said Trump uses tariffs as a way to initiate diplomacy. Photograph: Fabrice Coffrini/AFP/Getty Images
However, Trump’s commerce secretary, Howard Lutnick, played down the likelihood of a fresh trade war. Speaking on a panel at the World Economic Forum in Davos, he gave a bullish defence of US tariff policies but suggested the outcome of what he called the “kerfuffle” over Greenland was be likely to be diplomacy.
“We are here to make a very clear point: globalisation has failed the west and the United States of America. It’s a failed policy. It is what the west has stood for, which is export, offshore, find the cheapest labour in the world, and the world is a better place for it. The fact is, it has left America behind. It has left American workers behind,” he said.
Lutnick argued that Trump uses tariffs as “a way for him to say: ‘Hey, you know, you need to talk to us.’ Do I think the trade deals that we’ve set with Europe, with the UK, are they durable? I absolutely do … What I see happening is diplomacy and talking and at the table, rather than action, which is something I think the president cares about.”
Sitting alongside Lutnick, the UK chancellor, Rachel Reeves, said the UK was also interested in its economic security – but said the US should remember who its allies are.
“For all of your strengths, we do also need to preserve some of the things that the US has benefited from, in the Nato alliance, and the western alliance, not because it is the benevolent, because I believe it is in your country’s national interest.”
Reeves also urged people to keep cool heads as fears mount over Trump’s push for Greenland. “We absolutely want to de-escalate,” she told Bloomberg. “The future of Greenland is for the people of Greenland.”
Trump is scheduled to give a speech at Davos on Wednesday.
Earlier on Tuesday, the US treasury secretary, Scott Bessent, also speaking at Davos, urged European countries not to retaliate against the US’s trade tariffs announced over the Greenland crisis.
Referring to Trump’s “liberation day” tariffs, announced in April, Bessent said: “I would say this is the same kind of hysteria that we heard on 2 April. There was a panic.
“What I am urging everyone here to do is sit back, take a deep breath, and let things play out. The worst thing countries can do is escalate against the United States.”
But Kathleen Brooks, a research director at the broker XTB, said Bessent had failed to calm investor nerves.
“Overall, this is a man-made crisis, and the continued sell-off on Tuesday suggests that US threats to Greenland and their effects on financial markets could have further to go if the situation does not de-escalate soon,” she said.
Gold and silver hit record highs as investors sought shelter from the market falls. Gold rose past $4,700 (£3,500) an ounce for the first time on Tuesday, and silver hit a fresh high of $95.52 an ounce.
Trump wrote in a social media post on Saturday that eight European countries including the UK, France and Germany, will face tariffs “until such time as a Deal is reached for the Complete and Total purchase of Greenland”. The tariffs are due to start at 10% on 1 February, rising to 25% on 1 June.
Trump also added further uncertainty to global trade overnight by threatening to impose 200% tariffs on French wines and champagne after France’s Emmanuel Macron was reported to be unwilling to join his Gaza “board of peace”.
