Greenland tensions: New tariff and trade worries for global markets

What happened?

• While trade tensions and concerns over tariffs had abated in the months since April 2025, the threat of new tariffs by the U.S. to advance its efforts to gain control of Greenland has reignited market concern.
• Geopolitical tensions over Greenland escalated after U.S. President Donald Trump said he would hit exports from eight European countries—Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland—with tariffs unless they support his ambitions to gain control of the Arctic island.
• European Union countries are considering retaliatory measures, including the reactivation of EUR 93bn worth of tariffs against the U.S. that were prepared last year but suspended until February 6. The European Parliament is also unlikely to ratify the U.S.-EU trade deal from last year while these tensions persist.
• The EU may also decide to deploy its anti-coercion instrument (ACI), which aims to protect the EU and its member states from economic coercion by third countries. The instrument allows responses that go far beyond goods tariffs, such as a tax on U.S. services exports to the EU or direct restrictions on U.S. services firms’ business in the EU. 
• The retaliation measures are being drawn up ahead of key meetings between the EU and U.S. at the World Economic Forum (WEF) in Davos this week.
• No actions have been formalized, but markets are understandably unsettled by the uncertainty.

What are the initial market implications?

• The global market response to Trump’s comments over the weekend was initially contained, with U.S. markets closed on Monday, January 19. Volatility surged on Tuesday after the U.S. president reasserted his stance on Greenland. The VIX measure of market volatility climbed to its highest level in nearly two months.
• U.S. stocks fell in early trading with tech stocks in particular feeling the weight of market concerns over the implications of any retaliatory actions. European stocks were also down.
• Amid the volatility, demand for safe-haven assets pushed gold above USD 4,750 per ounce, a record high. Silver also hit a fresh record high.
• The U.S. dollar fell as investors, unnerved by the prospect of a U.S.-EU trade war, fled to the Swiss franc and the yen. Along with precious metals, the Swiss franc has been the biggest beneficiary of demand for assets perceived as safe havens.
• U.S. Treasuries also came under pressure Tuesday, influenced by a selloff in Japanese government bonds on fiscal concerns.

What are the developments to watch?

• Volatility will likely remain elevated while uncertainty persists, as markets weigh developments that are evolving daily.
• The meetings between Trump and European leaders at the WEF in Davos this week could be vital for reducing the temperature of current tensions, or for signs of escalation. The WEF is expected to be a high-stakes event, with negotiations on Greenland and tariffs likely to be a focal point.
• Markets may also be watching for the expected U.S. Supreme Court ruling on the legality of the so-called reciprocal tariffs that the Trump administration imposed last year under the International Emergency Economic Powers Act (IEEPA). However, the Trump administration could still use other trade statutes to support similar tariffs if the Court strikes down the existing tariffs.
• Markets will weigh the wider implications of the escalating tensions between the U.S. and Europe over Greenland, including what they could mean for NATO (The North Atlantic Treaty Organization), European defense funding, and the evolution of U.S. trade policy.

How is T. Rowe Price responding?

• The situation continues to develop, and there remain a number of uncertainties. As noted in our Global Market Outlook for 2026, we anticipate geopolitical uncertainty to remain a feature of markets in the year ahead. We continue to monitor these developments and potential implications for markets.