European stocks fell sharply Monday after President Trump threatened sweeping tariffs on eight allied nations in a bid to force the sale of Greenland — rattling investors and reviving fears of a full-blown transatlantic trade war while US stock markets were closed for the Martin Luther King Jr. Day holiday.
The Stoxx Europe 600 index plummeted 1.2% as investors dumped export-heavy names exposed to the US market.
Germany’s DAX dropped 1.3% to its lowest level in nearly two weeks, while France’s CAC 40 fell 1.8%, weighed down by heavy losses in luxury stocks.
London’s FTSE 100 fell a more modest 0.4%, cushioned by its heavier exposure to defensive sectors.
Luxury and auto shares were among the hardest hit, with LVMH, BMW and Volkswagen sliding on concerns that new tariffs would slam sales in the US — a critical market for Europe’s biggest exporters.
The selloff came after Trump warned Saturday he would impose a 10% tariff on all goods from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland starting Feb. 1, with the levy set to rise to 25% by June if negotiations over Greenland fail.
Investors were particularly rattled by the exposure of luxury and automakers to US demand, with traders warning that even modest tariffs could squeeze margins or force price increases that risk cooling demand.
Defense stocks bucked the broader market rout, with shares of Saab, Rheinmetall and Dassault Aviation each rising more than 2% as investors bet Europe could boost military spending if tensions with Washington escalate.
Meanwhile, investors also plowed into save-haven assets. The price of gold set a new record — following a year of steady gains — and the Swiss franc strengthened as the dollar weakened.
Spot gold jumped 1.7% to $4,672.49 an ounce by about noon Eastern Time after hitting a record of $4,689.39.
US futures pointed to a rough open on Wall Street on Tuesday, with S&P 500 and Nasdaq contracts down about 1% as traders braced for retaliation and broader fallout.
Trump’s latest tariff threats landed as the Supreme Court weighs his use of emergency powers to impose levies, adding another layer of uncertainty for investors already rattled by geopolitical risk.
A ruling against the administration could force the White House to rework its tariff strategy even as it escalates pressure on Europe.
Treasury Secretary Scott Bessent expressed confidence Sunday that the highest court in the land would keep the tariffs in place.
“I believe that it is very unlikely that the Supreme Court will overrule a president’s signature economic policy,” he told NBC’s “ Meet the Press.”
“They did not overrule Obamacare,” Bessent explained, referring to a June decision to uphold a key Affordable Care Act provision. “I believe that the Supreme Court does not want to create chaos.”
The European selloff spread across the continent Monday as investors braced for a response from Brussels, where European officials signaled they were preparing countermeasures that could sharply restrict US companies’ access to the single market.
European leaders warned the tariff threat risked triggering a dangerous escalation, underscoring that Greenland is an autonomous territory of Denmark and not for sale.
French President Emmanuel Macron is pushing the European Union to use a “trade bazooka” — potentially restricting US access to the EU market.
On Monday, German Chancellor Friedrich Merz tried to get Macron to tone it down.
“France is affected by the American tariffs to a different extent than we are, and in this respect I understand that the French government and the French president want to react a little more harshly than we do,” Merz said.
“Nevertheless, we are trying to adopt and will manage to find a common position” before EU leaders meet Thursday in Brussels, he added.
Markets are now focused on whether the European Union retaliates — and how fast — with traders eyeing potential targets ranging from US technology firms to aerospace and agricultural exports.
