FTSE 100 and Wall St sink as EU and Trump war of words heats up

The war of words between the Trump administration and Europe ramped up on Tuesday as world leaders headed for a showdown in Davos whilst global markets sunk into the red.

Ursula Von der Leyen, the president of the European Commission, said the tariffs imposed on European nations due to their staunch defence of Greenland’s sovereignty were a “mistake”.

“In politics as in business, a deal is a deal and when friends shake hands, it must mean something”.

The German politician pledged Europe’s response would be “unflinching, united and proportional”.

But a top figure in the Trump administration has slammed the “panic” fallout to President’s latest tariff salvo as global markets dove into the red on Tuesday morning.

Also in attendance at Davos’ World Economic Forum, US Treasury Secretary Scott Bessent appeared to mock European leaders indicating they would create a “dreaded working group” to retaliate.

He also compared the reaction to Trump’s sweeping levies as echoing that of ‘Liberation Day’ in April 2025, when the White House launched an economic offensive across key trading partners.

“I would say this is the same kind of hysteria that we heard on April 2nd. There was a panic,” Bessent said.

He added: “What I am urging everyone here to do is sit back, take a deep breath, and let things play out.”

Global markets take a hit

European markets were swimming in the red on Monday following the news that the UK, along with Denmark, Norway, Sweden, France, the Netherlands, Finland and Germany would face a 10 per cent a new tariff for their efforts defending Greenland’s sovereignty.

Losses worsened on Tuesday morning as Trump doubled down on the levies. The FTSE 100 was down one per cent by the time US markets opened at 2:30pm.

Over on Wall Street, the Dow Jones shed 1.2 per cent at the staring bell, the S&P 1.4 per cent and the tech-heavy Nasdaq 1.8 per cent. The sharp fall follows US markets being closed on Monday to mark Martin Luther King Day.

After Trump rowed back on his 2025 tariff offensive markets adopted the acronym TACO trade – Trump Always Chickens Out. But over the last 24 hours the President has said he will “100 per cent” carry out the fresh levies in Europe if an agreement for Greenland is not reached.

“The so-called Trump always chickens out trade was popular last year with global investors playing market volatility to their advantage, but the Trump of 2026 seems to act more decisively – take the military action in Venezuela as evidence of the President saying exactly what he then implemented,” Emma Wall, chief investment strategist at Hargreaves Lansdown, said.

The President is expected to take to the stage in Davos tomorrow, which Hall said will trigger further “market turmoil”.

Europe walks the tightrope

European leaders are having to walk a tightrope in diplomacy with the US administration, ensuring Greenland’s sovereignty is protected without risking a full-blown tariff war. 

Trump said he had a “good” call with Nato secretary general Mark Rutte, with European leaders set to meet in Davos leader to discuss the next course of action around Greenland. 

The US president also shared a private message from French president Emmanuel Macron stating “I do not understand what you are doing on Greenland”. 

Keir Starmer has meanwhile held firm on seeking to maintain “calm” diplomatic relations with Trump despite furious posts and tariff threats from the US president. 

There are also questions around Trump’s approach to dealing with China and Russia despite claiming the two nations posed a threat to US national security in their ambition to target Greenland. 

Trump confirmed that Russian president Vladimir Putin and China’s Xi Jinping were invited to join the Gaza ‘Board of Peace’. 

Starmer will be hoping he can ease tensions with the US over the coming days, having rejected suggestions that Trump was preparing military action. 

Mike Johnson, speaker of the US House of Representatives, also played down indications that Trump was prepared to invade the Danish territory.