London's financial markets are bracing for a turbulent start to the week after former President Donald Trump launched a fresh tariff offensive targeting the United Kingdom and key European allies.
The Tariff Ultimatum Over Greenland
In a startling post on his Truth Social platform on Saturday, Trump declared that the UK, alongside Denmark, Norway, Sweden, France, the Netherlands, Finland, and Germany, will face a new 10 per cent tariff. The punitive measure is a direct response to these nations' efforts in defending Greenland's sovereignty.
The President stated the tariff will be activated on 1 February 2026, with a planned escalation to a hefty 25 per cent from 1 June onwards. He made it clear these levies will persist until "a deal is reached for the complete and total purchase of Greenland."
Trump has consistently framed his ambition to acquire the vast Arctic island as a matter of US national security. The White House has previously indicated its intent to take control, whether "the easy way" or "the hard way."
Markets Recall Past Carnage
This re-introduction of aggressive tariffs into the geopolitical arena serves as a stark reminder of the market chaos triggered last April by Trump's so-called 'Liberation Day' policies. On that occasion, the FTSE 100 index plunged more than 11 per cent in a single week, hitting a low of 7679.48p.
However, a swift recovery followed when Trump ultimately rowed back on the measures. This pattern led traders to coin the term TACO trade – 'Trump Always Chickens Out' – fostering a degree of market scepticism towards the permanence of such aggressive posturing, often viewed as part of a negotiation strategy.
The FTSE 100 had enjoyed a strong position heading into the weekend, closing on Friday at 10,235.29p, marking a one per cent gain for the week. This positive movement, however, occurred roughly 24 hours before Trump's latest announcement, leaving the index vulnerable to a sharp correction when trading resumes.
Liberation Day 2.0 or More Bluster?
The critical question now facing investors and analysts in the City of London is whether this constitutes a serious 'Liberation Day 2.0' event capable of destabilising global markets once more, or if it will prove to be another instance of the TACO trade phenomenon.
The direct linking of tariffs to the sovereignty of Greenland represents a significant and unusual escalation, moving beyond traditional trade disputes into the realm of territorial ambition. Market reactions on Monday morning will be closely scrutinised for signs of sustained panic or calculated calm.
While London's blue-chip index recently celebrated breaching the 10,000-point threshold again, this new external shock threatens to test the resilience of the current rally. All eyes will be on how the UK government and its European partners respond to this unprecedented economic pressure campaign.
