Wall Street is braced for a sharp sell-off when trading resumes on Tuesday, after US stock futures tumbled during the Martin Luther King Jr. holiday. The dramatic slide signals deep investor anxiety over former President Donald Trump's renewed threat to impose punishing tariffs on key European allies, including the United Kingdom, as part of his escalating campaign to acquire Greenland.
Market Futures Signal Grim Opening Bell
Although US cash markets were closed for the public holiday, futures contracts continued to trade, offering a stark preview of Tuesday's likely session. Dow Jones Industrial Average futures fell by more than 400 points, a drop exceeding 0.8%. The broader S&P 500 and tech-heavy Nasdaq futures both declined by more than 1%. These instruments, which represent bets on where market indices will head when regular trading resumes, are viewed as a critical warning sign.
The futures slump extends losses from Friday's session, indicating a negative opening is almost certain. The sell-off was not confined to US markets. European stocks also fell broadly on Monday, with the pan-European Stoxx 600 index dropping more than 1% as traders digested the looming transatlantic trade dispute.
The Tariff Ultimatum Over Greenland
The market turmoil was triggered by a post from Donald Trump on his Truth Social platform. He issued a direct warning to eight nations: Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. Trump stated that, from June 1, 2026, tariffs on goods from these countries would rise to 25%.
He declared the steep levies would remain in place "until such time as a deal is reached for the complete and total purchase of Greenland." This follows an announcement on Saturday where Trump said he would impose new tariffs on EU countries if they obstructed his ambition to take over the semi-autonomous Danish territory.
EU Prepares Retaliatory 'Trade Bazooka'
In response to Trump's hard-line stance, European Union diplomats have moved swiftly. On Sunday, they agreed to potentially deploy the bloc's Anti-Coercion Instrument, a powerful retaliatory tool unofficially dubbed a 'trade bazooka'.
This measure could severely restrict US businesses from accessing EU markets, participating in government bids, and making direct investments. Furthermore, the EU is reportedly considering a retaliatory package of $108 billion in tariffs on American goods and services, which could begin as early as February.
The reignition of a major trade conflict comes at a precarious economic moment. US inflation remains stubbornly high, growing to 2.7% in December 2023, with tariffs being a key factor keeping consumer prices elevated.
Economists Warn of Severe Global Downturn
The potential consequences of a new trade war are alarming economists. Consultancy Oxford Economics has modelled a scenario where the US follows through with its 25% tariff threat and Europe retaliates in kind. Their analysis suggests US gross domestic product (GDP) would fall by 1%, with a similar hit to the eurozone.
The spillover effects would be devastating for global growth. The consultancy warns that global GDP could decline by 2.6% in both 2026 and 2027, which would mark the weakest annual pace of growth since the 2009 financial crisis, excluding the pandemic years. Trump is expected to be in Europe this week, attending the World Economic Forum in Davos, Switzerland, amid these heightened tensions.
