Financial markets across the globe are preparing for a volatile start to the week after former US President Donald Trump issued a fresh wave of tariff threats against key European allies, including the United Kingdom. The move, aimed at pressuring Denmark to sell Greenland, has sent shockwaves through trading desks and heightened fears of a renewed transatlantic trade war.
Market Forecasts Point to Sharp Declines
Indications from weekend trading point to significant losses when markets reopen. Data from the brokerage IG suggests Britain's FTSE 100 index is on track to fall by 0.9% on Monday. Across the Atlantic, the picture is similarly bleak, with IG's Weekend Wall Street market indicating a 0.5% drop for the Dow Jones Industrial Average.
The trigger for this risk-off sentiment is Trump's plan to impose new trade levies of 10% on goods from eight nations—Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland—starting 1 February. These tariffs are then slated to rise sharply to 25% on 1 June if his demands are not met.
Safe-Haven Surge and Widespread Condemnation
As equity markets brace for falls, the geopolitical uncertainty is driving investors towards traditional safe-haven assets. On IG's weekend bullion market, gold was trading 0.6% higher at $4,625 an ounce, edging closer to last week's record peak of $4,642. Spot silver also gained, rising 0.5% to $90.41 per ounce.
"This latest flashpoint has heightened concerns over a potential unravelling of Nato alliances and the disruption of last year's trade agreements," said Tony Sycamore, a market analyst at IG. He noted the situation is "driving risk-off sentiment in stocks and boosting safe-haven demand for gold and silver."
The move was swiftly condemned by European leaders. UK Prime Minister Sir Keir Starmer and European Commission President Ursula von der Leyen both criticised the policy on Saturday, warning it threatens to undermine the Nato defence alliance.
Business Leaders Warn of Economic Chaos
The reaction from business groups and industry analysts has been one of alarm. Susannah Streeter, chief investment strategist at Wealth Club, warned Trump's policy has "whipped up fresh economic chaos" and represents a setback for the UK economy.
"This is a migraine-inducing development for politicians who have already had to go through tortuous negotiations," Streeter stated. She warned that the new duties would likely be passed on to American consumers, as companies have little capacity left to absorb further costs.
In Germany, industry voices raised the stakes. The VDMA engineering association urged the European Commission to consider using its "anti-coercion instrument" against the US. "If the EU gives in here, it will only encourage the US president to make the next ludicrous demand," said VDMA president Bertram Kawlath.
William Bain, head of trade policy at the British Chambers of Commerce, called it "more bad news for UK exporters." He urged the UK government to prioritise implementing the frozen UK-US economic prosperity deal and to negotiate for the removal of the new tariff threat.
