- Trump threatened phased tariffs of 10% rising to 25% on eight European countries unless they agreed to a U.S. purchase of Greenland.
- Markets sold off on the threats and then rallied after Trump scrapped the tariffs at Davos, citing a vague future “framework” with NATO’s Mark Rutte.
- The episode reinforced the “TACO trade” narrative that aggressive U.S. threats often reverse, fueling volatility-driven relief rallies.
- Europe condemned the pressure and prepared countermeasures, while key details of the framework and Greenland’s status remain unresolved.
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On January 17-19, 2026, President Trump escalated a diplomatic stand-off by threatening 10% import tariffs (rising to 25% by June) on eight NATO/EU countries—Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland—unless they agreed to sell Greenland to the United States. This move triggered sharp market losses globally. The S&P 500 fell 2.1%, Nasdaq 2.4%, and the Dow 1.8% in one day of tumultuous trading.
The reversal came swiftly. On January 21, at Davos, Trump announced that he would cancel the planned tariffs following an agreement—or “framework of a future deal”—with NATO Secretary-General Mark Rutte. He also renounced his prior suggestion of using military force. Market sentiment turned positive; U.S. markets registered gains of approximately 0.7%–1.2%, and European indices rebounded similarly.
The pattern has been dubbed the “TACO trade” (Trump Always Chickens Out), a phenomenon where market anxiety over bold U.S. trade or foreign policy threats is followed by a retreat, sparking relief rallies. Analysts emphasize this latest event as highlighting the volatility inherent in treating aggressive geopolitical rhetoric as credible threat until it is retracted.
From a strategic standpoint, multiple questions emerge: What exactly does the framework entail—mineral development, military cooperation, “Golden Dome” missile defense? How will European nations assure their sovereignty over Greenland in practice, given their firm denials of transfer? Will markets factor in this episode as precedent for future unpredictable policymaking, boosting risk premiums? How will inflation, supply chains, and trade dependencies be affected if retaliation or future tariffs return?
Supporting Notes
- Threats announced: 10% tariffs from February 1 on goods from the eight European countries, ramping to 25% on June 1 if no agreement for U.S. purchase of Greenland.
- Market losses following threats: U.S. indices fell—S&P 500 down ~2.1%, Dow ~1.8%, Nasdaq ~2.4%—with technology, industrials, and retail among hardest hit.
- Reversal: Trump said he reached a “framework of a future deal” with NATO’s Mark Rutte, scrapping the tariffs and rejecting military force after speech in Davos.
- Market gains post-reversal: U.S. equities up approx. 0.7–1.2%; European indices likewise (e.g. Germany’s DAX +1.28%, Stoxx 600 +1.1%). Safe havens like gold remain near highs, the dollar flat.
- European reaction: strong condemnation, unity in opposition; Denmark unequivocal that Greenland remains part of the Kingdom.
- Poorly defined framework: details around military deployments, mineral rights, and defense remain vague; Greenlandic leaders deny any sale or ownership transfer.