President Trump’s escalating tensions with European leaders over his ambitions to take control of Greenland has rattled investors on Tuesday morning, leading to a broad sell-off in US stocks, and government bonds, while also pushing the dollar lower.
The S&P 500 fell around 1.5% as investors reacted to Trump’s threat of higher tariffs on various European countries unless they backed his plans for America to take over Greenland. This drop marks the steepest fall of the US stock index since November last year.
The latest threat comes shortly after Trump announced 10% additional tariffs on eight European powers, including Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Great Britain from February 1, 2026. These nations are already facing tariffs from the US.
The wave of increasing tariffs sparked widespread condemnation from leaders of the EU, with most calling the action unacceptable and vowing to stand behind the Arctic island.
Why are investors not flocking to US bonds amid turmoil?
Typically, when geopolitical tensions unsettled stock markets, investors seek refuge in traditional US safe-haven assets such as the dollar and government bonds. On Tuesday morning, however, that pattern broke down.
In a sign that investors were embracing a broader “sell America” trade. Money flowed out not only from US stocks but also from the dollar and US government debt. pushing both lower lost as investors moved away from US assets altogether, New York Times reported.
How much did the dollar fall?
The dollar index, which measures the US currency against a basket of currencies that represent America’s major trading partners, dropped 0.8%. The dollar weakened against all 10 currencies in the group, including the euro, British pound and Norwegian Krone.
This drop in value reflects broad-based losses for the US currency.
10-year US govt bond sees a fall in its value
Meanwhile, the yield on the 10-year US government bond gained. Since debt’s yield moves inversely to price, it means that the value of the note declined due to the sell-off, N.Y. time reported.
This yield acts as one of the most important interest rates in the world by underpinning interest rates across consumer and corporate debt. The 10-year yield rose 0.1 percentage points, to 4.3%, its sharpest move higher so far this year, undermining the administration’s efforts to move interest rates lower.
Today’s morning trading marked the first opportunity for US markets to respond to Trump’s escalating threats toward Europe over the weekend, as the stock market was closed on Monday in honor of Martin Luther King’s Birthday.
