TLDR
- Trump announced 10% tariffs on EU goods from Feb 1, linked to Greenland support.
- The Euro Stoxx 50 opened 1.7% lower, while Germany’s DAX dropped by 1.3%.
- The EU is considering tariffs on $108 billion in U.S. goods in response.
- Goldman Sachs says the GDP hit may reach 0.2% across affected European countries.
European markets opened lower on Monday after former U.S. President Donald Trump announced new tariff threats targeting eight European countries. The tariffs, connected to disputes over Greenland, led to sharp declines in major European indices and heightened trade tensions between the U.S. and Europe.
Trump’s Announcement Shakes Investor Confidence
European markets opened sharply lower after Donald Trump announced a new round of proposed tariffs on eight European countries. The former U.S. President said the 10% tariffs would begin on February 1, targeting nations supporting Greenland’s resistance to U.S. territorial claims. He added that the tariffs would rise to 25% in June if no agreement was reached.
Global stocks slid and the ​dollar eased against the safe-haven yen and Swiss franc after Trump threatened to slap extra tariffs on ‌goods imported from eight European nations until the US was allowed to buy Greenland https://t.co/f8rfB0RGPV pic.twitter.com/uFDOhIYryX
— Reuters (@Reuters) January 19, 2026
This announcement triggered a selloff across European indices. The Euro Stoxx 50 index dropped by 1.7%, Germany’s DAX fell by 1.3%, and France’s CAC 40 declined by 0.7%. Italy’s FTSE MIB fell by 1.6%, and the UK’s FTSE 100 dipped 0.4%. The broader Stoxx Europe 600 Index declined by 1.1%, with automakers and luxury brands recording some of the largest losses.
Automakers and Luxury Stocks Fall While Defense Gains
French luxury brand LVMH saw a 4% drop, its biggest since April. German automakers Volkswagen and Mercedes-Benz also declined by over 3%. Analysts pointed to their heavy exposure to the U.S. market as a key factor in the losses.
Meanwhile, the defense sector gained due to rising geopolitical concerns. Rheinmetall AG shares rose more than 2%. Market participants interpreted the tariff threat as part of wider strategic pressures involving national security and trade.
European and U.S. Response Underway
In response, the European Union began internal discussions on potential retaliation. According to officials, the EU is considering tariffs on €93 billion ($108 billion) worth of U.S. goods. It has also suspended approval of a July trade agreement with the U.S.
Germany’s finance chief stated that Trump’s move had crossed a “red line” and called for Europe’s strongest countermeasures. Analysts expect a measured response but warned of increased uncertainty for exporters and financial markets.
Goldman Sachs noted that a 10% U.S. tariff could reduce real GDP by up to 0.2% across affected EU countries. The bank also warned of wider confidence and market effects if tensions escalate further.
Market Volatility Amid U.S. Holiday and Low Liquidity
Monday’s market reaction came as U.S. exchanges remained closed for a public holiday. This contributed to lower liquidity, which can magnify price swings. Only one euro-denominated bond offering was made on Monday, marking the quietest issuance day since December 2024.
Short-term government bond yields dropped, reflecting demand for safer assets. The German two-year yield fell by four basis points to 2.07%. The U.S. dollar weakened against most Group-of-10 currencies, while the Swiss franc gained.
Market strategists are watching for the European Union’s next steps. Some expect the tariffs to remain a threat rather than becoming formal policy. Others believe a political resolution may emerge in coming weeks.
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