Chancellor Rachel Reeves was forced to cancel a major speech heralding a "new golden age" for the City of London on Monday, as financial markets across Europe plunged in response to a fresh international crisis sparked by former US President Donald Trump.
Trump's Greenland Gambit Triggers Market Turmoil
The immediate cause of the disruption was a startling intervention from Donald Trump, who has threatened to impose sweeping tariffs on the United Kingdom and key European allies. The threat is conditional on these nations facilitating a deal for the US to purchase Greenland from Denmark. Mr Trump has not ruled out military action to achieve this aim, concerning a territory that is a semi-autonomous part of the Kingdom of Denmark.
In response to the escalating geopolitical tension, investors fled to safe-haven assets. The price of gold soared to a fresh record high of approximately $4,680 (£3,491) per ounce. Meanwhile, European stock markets opened sharply lower. London's FTSE 100 was down around 0.6% by mid-morning, with Germany's DAX index falling 1.5% and France's CAC 40 tumbling 1.6%. The price of Brent crude oil also dropped by 0.7% to $63.70 per barrel.
Diplomatic Wrangling and a Cancelled Celebration
The market chaos directly impacted the Chancellor's schedule. Ms Reeves withdrew from a planned appearance at the London Stock Exchange, where she was due to celebrate the FTSE 100's recent record performance and unveil new rules to make it easier for companies to list in London.
Instead of delivering her optimistic address, she attended an emergency statement by Prime Minister Sir Keir Starmer in Downing Street. Sir Keir urged for calm, stating the Greenland dispute "should be resolved through 'calm discussion between allies' rather than military action or a trade war". He signalled Britain would not engage in retaliatory tariffs, calling that approach the wrong way to resolve differences within an alliance.
The speech Ms Reeves intended to give struck a markedly different tone. "Two years ago, some said the City's best days were behind it. They were wrong," her prepared remarks stated. "As the FTSE 100 reaches record highs and global firms once again choose London, we are seeing the first signs of a new golden age for the City."
Analysts Warn of Volatility and Economic Impact
Financial experts were quick to assess the potential damage. John Wyn-Evans, head of market analysis at Rathbones, noted Trump's tariff threat was "consistent with his habit of using trade as leverage". He warned that while the former president often retreats when economic costs mount, further market volatility is likely in the interim.
Amisha Chohan, head of equity research at Quilter Cheviot, suggested this might be a "slower burn" than previous tariff episodes, allowing time for diplomacy. However, she cautioned that tariffs could create volatility in inflation, potentially delaying interest rate cuts, which would ultimately be negative for stock markets.
The specific tariff plan outlined by Mr Trump involves charging the UK a 10% duty on all goods sent to the US from February 1, rising to 25% from June 1, until a Greenland deal is reached. The same terms apply to Denmark, Norway, Sweden, France, Germany, the Netherlands, and Finland—all fellow NATO members.
