Stocks plunged during afternoon trading on Wall Street on Tuesday following U.S. President Donald Trump’s announcement of potential new tariffs on eight NATO countries amidst escalating tensions over American interests in Greenland. The S&P 500 recorded a significant 2.1% decline, marking its most substantial drop since October. This downturn marked the first opportunity for U.S. markets to react to Trump’s statements, as they were closed on Monday for Martin Luther King Jr. Day.
The Dow Jones Industrial Average saw a sharp decline of 877 points, equivalent to a 1.8% decrease, as of 2:46 p.m. ET. Concurrently, the Nasdaq composite also experienced a notable decline of 2.4%. The negative trend extended to European and Asian markets. In Canada, the S&P/TSX composite index dropped by 340.68 points to 32,750.28.
The market decline was widespread, with technology stocks leading the losses due to their significant market influence. Notably, Nvidia, a top-tier company, witnessed a substantial 3.6% drop. Other major companies like Amazon, JPMorgan Chase, and Caterpillar also recorded declines of 3.7%, 2.9%, and 3% respectively.
In contrast, companies focusing on consumer staples fared relatively better. Colgate-Palmolive and Campbell’s registered gains of 1.5% and 1.7% respectively. The price of U.S. crude oil rose by 1.5% to $60.34 per barrel, while the price of Brent crude, the global benchmark, increased by 1.3% to $64.76.
Trump’s threat of imposing a 10% import tax on goods from select European countries triggered market concerns. The annual imports from European Union nations surpass those of the two largest individual U.S. importers, Mexico and China. The announcement led to market declines in Paris, Frankfurt, and London, with all markets facing potential back-to-back losses.
The heightened geopolitical tensions prompted investors to seek safety in precious metals, leading to record highs for gold and silver. Gold surged by 3.7%, and silver soared by 6.9%. The uncertainty surrounding trade tensions also impacted Bitcoin, which experienced a drop from over $96,000 to approximately $89,300.
Trump’s aggressive stance on Greenland, linked to his Nobel Peace Prize snub, has intensified the rift between the U.S. and its allies. The European response to the tariff threats has been met with outrage and diplomatic discussions on potential countermeasures and trade strategies.
The ongoing trade conflicts have added pressure to global economies, with uncertainty surrounding tariff policies creating challenges for businesses in planning and decision-making. The potential impact on inflation poses additional challenges for the Federal Reserve in navigating economic policies to maintain stability amidst rising uncertainties.