S&P500 and Nasdaq 100: Trump Tariffs Threaten to Erase All 2026 US Stock Gains

Markets Brace for Sharp Decline as Trump’s European Tariff Threats Rattle Investors

U.S. stock market investors are bracing for a sharply lower cash market opening when trading resumes on Tuesday following the long holiday weekend after President Trump’s latest tariff threats against Europe. U.S. stocks were closed Monday for the Martin Luther King Jr. Day holiday.

Trump Escalates Pressure on Denmark with Sweeping European Tariffs

On Saturday, Trump announced 10% tariffs on imports from eight European countries, including Denmark, the U.K., France, and Germany, effective Feb. 1, as he ramped up pressure for Denmark to sell Greenland to the U.S., according to MarketWatch.

Futures Signal Deep Losses Across Major Indices

At 09:00 GMT, E-mini Dow Futures are trading 48,831.00, down 716.00 or -1.45%. E-mini S&P 500 Index Futures are at 6,868.50, down 108.25 or -1.55%, and E-mini Nasdaq-100 Index Futures are off 467.75 or -1.82% at 25,221.25.

Echoes of April’s ‘Sell America’ Trade Emerge

The bearish start to the week is reviving memories of the steep decline in April 2025 when the ‘Sell America’ trade emerged following Trump’s global “Liberation Day” tariffs, where investors dumped U.S. stocks, Treasuries, and the dollar. This time it’s all about the threat of additional tariffs on European nations if a deal on Greenland is not reached.

Divided Opinions: Knee-Jerk Reaction or Long-Term Disruption?

To some, this appears to be a knee-jerk reaction to Trump’s new directive. They are holding out hope that a bearish reaction in the markets will send a signal that his actions are not good for investors and the economy.

Nonetheless, there are others who see this as just the beginning of a potentially disruptive stalemate between the United States and the European Union (EU).

Even if there is a de-escalation of this situation, doubts will be raised about the credibility of any future trade deals, and tariff uncertainty will remain elevated, perhaps keeping a lid on the stock market for a long period of time.

EU Readies ‘Trade Bazooka’ as NATO Concerns Mount

The EU is not taking the threat lightly either, with experts warning this event could lead to the demise of NATO. Furthermore, the EU is poised to exercise its $93 billion in retaliatory tariffs against the U.S. Additionally, while the Europeans appear to be hoping for a peaceful resolution, they are prepared to activate a “trade bazooka,” designed to take collective defense against economic coercion.

All Eyes on Trump’s Davos Speech Wednesday

President Trump is scheduled to attend the World Economic Forum in Davos, Switzerland, along with many European leaders. Trump is also scheduled to deliver a speech on Wednesday at 13:30 GMT.

All eyes will be on him to see if he continues to stand his ground while he explains his plans for the takeover of Greenland. If he delivers the wrong message and the EU retaliates, stock market investors could face even steeper losses.

Major Indices Poised to Erase 2026 Gains

Based on current futures prices, the cash S&P 500 Index (SPX) and the cash Nasdaq Composite Index (IXIC) are expected to turn lower for the year when they open on Tuesday. The Dow is still slightly higher, but momentum suggests all of its 2026 gains are likely to be wiped off the board later today.

More Information in our Economic Calendar.