Stock market plunges as Trump's Greenland threats spark transatlantic trade war

Jan. 20, 2026, marked the worst day for stocks since Oct. 2025. The Dow Jones fell 800 points. The S&P 500 and Nasdaq both dropped more than 2%. Both the S&P 500 and Nasdaq turned negative for 2026 after the losses. The sell-off was triggered by Trump's escalating tariff threats and territorial demands over Greenland.

Trump announced 10% tariffs on eight European countries—Denmark, Norway, Sweden, France, Germany, UK, Netherlands, Finland—starting Feb. 1 and rising to 25% by Jun. 1. He explicitly linked the tariffs to Greenland, wanting Europeans to stop backing Denmark's sovereignty. He also threatened 200% tariffs on French wine after President Macron refused to join his 'Board of Peace.' The EU began preparing €93 billion ($108 billion) in counter-tariffs.

Tech stocks led the decline. Nvidia, Microsoft, Meta, and Oracle all dropped 2-3%. Investors fled to safer assets amid fears of a transatlantic trade war. The tech sector is particularly sensitive to trade tensions because these companies have significant European operations and supply chains. The uncertainty made business planning impossible.

Treasury Secretary Scott Bessent, who was confirmed by the Senate just days earlier on Jan. 27, 2025 (68-29 vote) and sworn in Jan. 28, made no public statement during the 800-point market crash on Jan. 20, 2026. His silence was notable because Treasury Secretaries typically coordinate economic messaging during market volatility. Bessent's absence from crisis management reflected Trump's personalization of trade policy and sidelining of traditional economic advisors, showing Treasury's diminished role in Trump's tariff-driven foreign policy.

Federal Reserve Chair JPJerome Powell avoided commenting directly on Trump's tariff policies during the market turmoil. Bond markets priced in increased probability of Fed rate cuts in 2026 if economic growth slows due to trade conflicts. The Fed faces pressure to offset economic damage from trade uncertainty, but Powell's silence during the sell-off left investors without official reassurance about potential monetary policy responses.

Goldman Sachs CEO DSDavid Solomon's economists warned that sustained U.S.-Europe trade conflicts could knock 0.5-1.0 percentage points off U.S. GDP growth in 2026. Goldman Sachs analysis showed how counter-tariffs targeting U.S. agricultural exports and manufacturing would hit politically important states. Wall Street analysts expressed concern that Trump's unpredictable tariff threats make investment decisions difficult and create economic uncertainty that could damage growth.

The market collapse came the same day Trump sent Norway's prime minister a letter saying he no longer feels 'an obligation to think purely of Peace' because Norway didn't give him the Nobel Peace Prize. Investors saw the letter as evidence of erratic foreign policy decision-making based on personal grievances rather than strategic economic interests.

European markets also fell sharply. Denmark's OMX Copenhagen index dropped 1.8%. German DAX fell 1.2%. France's CAC 40 declined 1.5%. The coordinated global sell-off reflected investor fears that Trump's territorial ambitions would destabilize international trade and alliance relationships. The losses weren't limited to U.S. markets.

Bond yields fell as investors sought safe-haven assets. The 10-year Treasury yield dropped to 4.52% from 4.61% the previous day. Gold prices rose 1.3%. Currency markets showed volatility, with the euro strengthening against the dollar on expectations that the Federal Reserve might need to cut rates if trade wars damage the U.S. economy.

Danish pension funds dumped $1.4 billion in US Treasuries during Dec. 2025 and Jan. 2026 as Trump threatened tariffs over Greenland. Denmark's largest fund, PFA, sold out completely in 2025 after chief strategist Tine Choi Danielsen said 'Trump's policies are causing so much turmoil' they couldn't keep the bonds. AkademikerPension's CIO Anders Schelde announced a $100 million exit on Jan. 20, citing 'poor U.S. government finances'—though he admitted Trump's Greenland threats 'didn't make it more difficult to take the decision.' Teachers' fund Lærernes Pension shifted DKK 3.5 billion ($500 million) to German bonds in late Dec..