New York Stocks Plunge on Trump’s 'Greenland Tariff' Threat... 'Sell America' Hits Treasuries and Dollar

Trump Warns Europe: "Greenland Tariffs to Be Fully Enforced"
Escalating U.S.-Europe Tensions Trigger Simultaneous Declines in Stocks, Bonds, and the Dollar
Will the U.S. and EU Find a Breakthrough at Davos?

On January 20 (local time), all three major U.S. stock indices in New York experienced a sharp decline following President Donald Trump's warning of imposing 'Greenland tariffs' on Europe. As tensions between the United States and Europe over the Greenland issue intensified, concerns grew that the conflict could escalate into a transatlantic trade war. As a result, a so-called 'Sell America' trend emerged, with not only stocks but also U.S. Treasury bonds and the dollar falling in value.

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As of 9:48 a.m. on the New York Stock Exchange, the Dow Jones Industrial Average, which focuses on blue-chip stocks, was down 632.95 points (1.28%) at 48,726.38 compared to the previous trading day. The S&P 500 Index, which is centered on large-cap stocks, dropped 94.2 points (1.36%) to 6,845.81, while the tech-heavy Nasdaq Index plunged 396.366 points (1.69%) to 23,119.022.

The immediate cause shaking the market was the escalation of geopolitical conflict and trade tensions surrounding Greenland. On January 17, President Trump announced that he would impose tariffs on imports from eight European countries until a "complete and comprehensive" agreement to purchase Greenland was reached. The targeted countries are Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland. The plan is to impose a 10% tariff starting February 1 and raise it to 25% starting June 1.

In addition, President Trump threatened to impose a 200% tariff on French wine and champagne, specifically targeting France for refusing to participate in the Gaza Peace Committee. While the committee claims to be aimed at ending and managing the Gaza war, critics argue that it is essentially an attempt to replace the United Nations.

The European Union (EU) is also considering countermeasures against the United States. The EU is weighing the possibility of invoking the Anti-Coercion Instrument (ACI), also known as the 'trade bazooka,' to respond to third countries that economically threaten its member states, and is deliberating on the level of response.

Amid concerns over the spread of the trade war, both the dollar and U.S. Treasury bond prices are declining across financial markets. The dollar index, which measures the value of the U.S. dollar against the currencies of six major countries, is down 0.86% from the previous trading day at 98.34.

As U.S. Treasury bond prices fall, especially for long-term bonds, yields are under upward pressure. The yield on the 10-year U.S. Treasury bond, the global benchmark for bond rates, is up 5 basis points (1bp=0.01 percentage point) from the previous trading day, moving at around 4.28%. In contrast, the yield on the 2-year U.S. Treasury bond, which is sensitive to monetary policy, is down 1 basis point from the previous day at 3.58%. The rise in Japanese government bond yields is also contributing to global bond market instability. This is due to increased concerns about fiscal soundness as both ruling and opposition parties in Japan, ahead of next month's general election, are making populist campaign pledges.

However, experts are also paying attention to the possibility of the United States and the EU seeking a diplomatic solution. There is speculation that a breakthrough to ease tensions could be found through face-to-face meetings between EU leaders and President Trump at the Davos Forum from January 19 to 23. President Trump is scheduled to lead the largest-ever U.S. delegation to the World Economic Forum (WEF, also known as the Davos Forum) in Davos, Switzerland, and deliver a speech on January 21.

Krishna Guha, Vice Chairman of Evercore ISI, stated, "Investors expect some form of compromise to emerge, so the seriousness of the situation will ultimately be limited." However, he added, "If these negotiations break down, the impact will be very severe and will have lasting aftershocks across multiple areas, including the dollar."

By sector, technology stocks are showing pronounced weakness. Nvidia is down 2.33%. Microsoft is down 1.82%, and Apple is down 0.59%. Alphabet, Google's parent company, and Meta, Facebook's parent company, are also down 1.77% and 2.01%, respectively, continuing the sluggish trend in technology stocks.