US stock futures fell sharply on Monday, 19th January 2026, after former President Donald Trump threatened to impose a significant 10% additional tariff on imports from eight European countries. The threat was made in retaliation for their opposition to a US takeover of Greenland.
European Allies Unite in Forceful Rebuke
The move prompted an immediate and unusually strong joint condemnation from the nations targeted: Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland. In a statement, they declared that Trump's threats "undermine transatlantic relations and risk a dangerous downward spiral." This represents the most forceful rebuke from European allies since Trump returned to the White House nearly a year ago.
The market reaction was swift and negative. Futures for the S&P 500 index fell 0.9%, while those for the Dow Jones Industrial Average dropped 0.8%.
Markets React as Strategic Trust is Tested
Analysts warned that the episode tests the fundamental trust underpinning the Western alliance. Stephen Innes of SPI Asset Management noted that Trump's actions are "testing the strategic alignment and institutional trust" from Europe, the US's largest trading partner. "In a world where geopolitical cohesion within the Western alliance is no longer taken for granted, the willingness to recycle capital indefinitely into U.S. assets becomes less automatic," Innes said. He characterised the potential shift not as a short-term sell-off, but as a "slow rebalancing story" with far more significant long-term consequences.
Meanwhile, Asian markets presented a mixed picture. Trading followed China's report that its economy grew at a 5% annual pace in 2025, albeit with a slowdown in the final quarter. Strong exports helped offset weaker domestic demand. Hong Kong's Hang Seng index lost 1.1%, while the Shanghai Composite gained 0.3%. Japan's Nikkei 225 declined 0.7%. South Korea's Kospi, however, jumped 1.3% to a record high, buoyed by tech stocks.
Earnings and Inflation Data in Focus
Investors are also looking ahead to a busy week of corporate earnings and key inflation data. The latest quarterly results from major firms, including United Airlines, 3M, and Intel, may provide insights into consumer spending and business resilience amid persistent inflation and higher tariffs. Technology sector results are under particular scrutiny to assess whether high stock valuations driven by artificial intelligence enthusiasm are justified.
Furthermore, the US Federal Reserve will receive a crucial update on inflation with the release of the Personal Consumption Expenditures (PCE) price index, its preferred gauge. The Fed's next policy meeting is in two weeks, where it is expected to hold interest rates steady as it navigates a slowing jobs market and inflation that remains stubbornly above its 2% target.
In other early Monday trading, oil prices were mixed, with US benchmark crude slipping to $59.06 per barrel. The price of gold resumed its climb, gaining 1.8%, while silver jumped 5.3%.
