Trump’s Greenland Gambit Roils Markets And Allies

It was a week that few on Wall Street will soon forget. Markets worldwide were rocked by a diplomatic crisis of the most unusual kind: President Donald Trump’s renewed push for the United States to acquire Greenland, the autonomous Danish territory. The saga, which unfolded at breakneck speed over the Martin Luther King Jr. Day holiday and the days that followed, sent shockwaves through financial markets, upended transatlantic relations, and left investors scrambling to make sense of the risks facing U.S. assets.

On Tuesday, January 20, 2026, the U.S. stock market opened to a broad selloff. The tech-heavy Nasdaq tumbled 2.4%, pushing it into negative territory for the year. The Dow Jones Industrial Average dropped a staggering 870 points, or 1.8%, while the S&P 500 fell 2.1%. According to The Wall Street Journal, it was the worst one-day loss across major assets—including stocks, Treasuries, Bitcoin, and corporate bonds—since April 2025. Even the U.S. dollar, often a haven in times of uncertainty, shed 0.8% against major currencies. Bitcoin, not one to shy away from drama, plunged 6.4% as reflected in the iShares Bitcoin Trust ETF.

What triggered this rout? President Trump’s threats to impose new tariffs on goods from eight European NATO allies unless they agreed to a U.S. takeover of Greenland. The tariffs—set to start at 10% on February 1 and escalate to 25% by June—targeted Denmark, Norway, Sweden, France, Germany, the U.K., the Netherlands, and Finland. Trump, in his characteristically blunt style, told reporters, “You’ll find out” when asked how far he’d go to secure Greenland. He later tied his ambitions to not winning the Nobel Peace Prize, writing to Norway’s prime minister that his Greenland push was partly motivated by that snub. As Investors Business Daily noted, this was not just about geopolitics; it was personal.

The fallout was immediate. European lawmakers suspended the European Union’s trade deal with the U.S. that had been reached just months earlier. European Commission President Ursula Von der Leyen called Trump’s tariff proposal a “mistake” that could plunge both economies into “a dangerous downward spiral.” French President Emmanuel Macron, speaking at the World Economic Forum (WEF) in Davos, threatened to use the EU’s Anti-Coercion Instrument—a tool that could restrict U.S. businesses’ access to Europe’s vast single market. “Our response will be unflinching, united and proportional,” Von der Leyen declared, standing in “full solidarity” with Greenland and Denmark.

Markets, already jittery from the weekend’s developments, were battered further by uncertainty over the legal basis for Trump’s tariffs. The president invoked the International Emergency Economic Powers Act (IEEPA), but the Supreme Court was set to rule on the validity of such tariffs. With opinions due any day, investors braced for more volatility. “This is one of those be-ready-for-anything weeks as wildcards abound for both US and global markets—most of them POTUS-related,” wrote Yardeni Research, according to The Wall Street Journal.

In the bond market, the 10-year U.S. Treasury yield surged by 0.064 percentage points to 4.294%, its highest since August 2025. Higher yields mean lower bond prices, and the selloff in Treasuries underscored just how broad the “sell America” trade had become. Even typically defensive assets weren’t spared—except for consumer staples, which eked out a modest 0.12% gain while all other S&P 500 sectors finished in the red.

Wednesday brought a tentative reprieve. Speaking at the WEF in Davos, President Trump attempted to calm markets by ruling out the use of military force to acquire Greenland. “We never asked for anything, and we never got anything. We probably won’t get anything unless I decide to use excessive strength and force... But I won’t do that. Okay? Now everyone’s saying, ‘Oh, good.’ That’s probably the biggest statement I made, because people thought I would use force. I don’t have to use force. I don’t want to use force. I won’t use force,” Trump said, as quoted by CNBC. The remarks sent the Dow up by 201 points (0.4%), the S&P 500 up 0.3%, and the Nasdaq up 0.1% in early trading. Treasury prices rose, yields fell, and the dollar index pared its earlier losses.

But the relief proved fleeting. Trump doubled down on his intention to pursue “immediate negotiations” for Greenland’s acquisition, while confirming that the new tariffs on NATO allies would go ahead unless a deal was struck. The administration’s stance was clear: the U.S. was prepared to use economic leverage to get what it wanted, even at the cost of straining relations with some of its closest allies.

European leaders, for their part, were unmoved. The EU Parliament’s suspension of the transatlantic trade deal sent a powerful signal that Europe would not be coerced. Macron’s threat to restrict U.S. companies’ access to public tenders and the single market, using the Anti-Coercion Instrument, raised the stakes for American tech giants and exporters. The EU also weighed retaliatory tariffs and other measures, as reported by The New York Times.

Back in the U.S., the political and legal drama continued. On Wednesday, the Supreme Court was scheduled to hear oral arguments in a case brought by Federal Reserve governor Lisa Cook, who was challenging Trump’s efforts to remove her from the central bank. A separate Supreme Court decision regarding the president’s use of emergency powers to impose tariffs was also pending. The week was, as BMO’s Ian Lyngen put it, one where “wildcards abound.”

Meanwhile, the market’s undercurrents reflected deeper anxieties. According to Investors Business Daily, polls showed that Americans strongly disapproved of Trump’s aggressive attempts to seize Greenland. The so-called “sell America” trade—where investors dump U.S. stocks, bonds, and currency in favor of overseas assets—was back in force, reminiscent of the tariff shocks of 2025. Yet, as BMO’s Lyngen suggested, this episode might be “short-lived” compared to last year’s turmoil. Much would depend on the Supreme Court’s rulings and the next moves from the White House.

Amid the chaos, a few bright spots emerged. Bank stocks rallied after Trump announced he would ask Congress to implement a 10% cap on credit card interest rates, though analysts were skeptical about its legislative prospects. Citigroup and Capital One each rose about 1%. In the world of corporate earnings, Netflix, United Airlines, Interactive Brokers, and Johnson & Johnson all reported quarterly results, providing some distraction from the geopolitical drama. Taiwan Semiconductor’s $1.8 billion acquisition of a chip fabrication site in Taiwan underscored the continued strength of the AI and semiconductor sectors.

As the dust settles, the episode serves as a vivid reminder: in today’s interconnected world, political gambits can have immediate and far-reaching consequences for global markets. Investors, policymakers, and ordinary citizens alike are left to ponder what comes next—and whether the world’s largest economy can weather the storms of its own making.