U.S. equities suffered big losses Tuesday after President Donald Trump intensified his rhetoric on Greenland, threatening to impose new tariffs on countries opposing the sale of the Danish territory to the United States.
U.S. Treasury yields spiked and the U.S. dollar declined as Trump's threat caused a flight from U.S. assets. Danish pension operator AkademikerPension said Tuesday that it is exiting U.S. Treasurys because of finance concerns over U.S. debt.
The Dow Jones Industrial Average shed 870.74 points, or 1.76%, to end the session at 48,488.59. The S&P 500 dipped 2.06% to settle at 6,796.86. The Nasdaq Composite slid 2.39%, closing at 22,954.32. It was the worst session since October for all three major averages.
The day's losses put the S&P 500 and the Nasdaq into negative territory for 2026: The broad market index is now off 0.7%, while the tech-heavy Nasdaq is down 1.2% in the period. The Cboe Volatility Index (VIX) — Wall Street's "fear gauge" — spiked to a high of 20.99.
Trump announced in a Truth Social post on Saturday that eight NATO members' U.S. imports will face escalating tariffs "until such time as a Deal is reached for the Complete and Total purchase of Greenland." The tariffs will start at 10% on Feb. 1 and rise to 25% on June 1, Trump said.
Trump then threatened to impose 200% tariffs on French wines and champagne amid reports that the country's president, Emmanuel Macron, is unwilling to join his so-called Board of Peace. Trump also hit out at the U.K., labeling the British government's plan to hand over sovereignty of the Chagos Islands — one of which is the site of a U.K.-U.S. military base — to Mauritius as an "act of great stupidity." He said the move was "another in a very long line of National Security reasons why Greenland has to be acquired."
Brad Long, chief investment officer at Wealthspire, told CNBC that he isn't surprised these latest developments are weighing on stocks, given that the market is "already priced for perfection" with "high" valuations and earnings expectations.
"While tariffs is not new and Greenland, frankly — or the administration's interest in Greenland — isn't new, the weaponization of tariffs in the short term to achieve kind of a non-economic or maybe economic adjacent goal is new," he said. "Europe walked out of 2025 largely unscathed, or at least unscathed on a relative basis for tariffs. Now, this is a direct line to some of the U.S.' closest allies — eight nations across Europe, 10% to 25% tariffs. We're kind of picking back up the 2025 April volatility of Trump uncertainty and shifts in policy."
European leaders have described Trump's fresh tariff threats as "unacceptable" and are reportedly considering countermeasures — with France said to be pushing for the European Union to use its strongest economic counter-threat, known as the "Anti-Coercion Instrument."
"On the other side of trade deficits and trade wars, there are capital and capital wars," Ray Dalio, founder of Bridgewater Associates, told CNBC's "Squawk Box" at the World Economic Forum in Davos, Switzerland. "If you take the conflicts, you can't ignore the possibility of the capital wars. In other words, maybe there's not the same inclination to buy at U.S. debt and so on."
Trump, who is due to speak in Davos on Wednesday, said he had agreed to speak with European leaders at the conference to discuss his Greenland ambitions.
Treasury Secretary Scott Bessent defended Trump's proposed takeover of Greenland to CNBC on Tuesday, saying: "That will stop any kind of a kinetic war, so why not pre-empt the problem before it starts?"
— CNBC's Fred Imbert contributed reporting.
