European Markets Braced for Sharp Drop on Fresh Trump Tariff Threats

European equity markets are poised for a sharp decline at the open after former U.S. President Donald Trump announced fresh tariff threats targeting eight European countries.

Key market moves:

• Euro Stoxx 50 futures: -1.3%
• S&P 500 futures: -0.8%
• Automakers (Porsche, Volkswagen, Mercedes): Down over 3% in early Tradegate trading.
• U.S. markets are closed for a holiday.

The trigger: On Saturday, Trump announced a 10% tariff on goods from European nations supporting Greenland against U.S. threats to “seize” the territory. The levy, set for February 1, could rise to 25% in June unless a deal for the “Complete and Total purchase of Greenland” is reached.

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European response: EU leaders, including France’s Emmanuel Macron, condemned the move. The bloc is discussing potential counter-tariffs on €93 billion ($108 billion) of U.S. goods.

Analyst views:

• Short-term pain: Analysts predict a “risk-off” move, hitting equities initially. Citi estimates a 10% tariff could drag European EPS growth down by 2-3 percentage points.
• Long-term uncertainty: The threat interrupts a European stock rally, with the Stoxx 600 up 36% in dollar terms since early 2025, double the S&P 500’s gain.
• Sector impact: Luxury goods, automakers, and miners are seen as most vulnerable. Defense stocks like Rheinmetall (+1.2%) may find support.

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