US stock futures pointed to steep declines on Tuesday, with Dow Jones Industrial Average futures dropping about 1.3%, signaling a nearly 600-point fall at the market open. S&P 500 futures sank 1.3%, and Nasdaq 100 futures retreated 1.6%.
President Trump reignited trade-war tensions over the weekend by stating that eight NATO countries would face additional 10% import duties unless the United States secured a deal to purchase Greenland. On Monday, he continued pursuing Greenland, even as the European Union discussed $108 billion in retaliatory tariffs and considered deploying an "anti-coercion instrument" that could potentially impact US assets by around $8 trillion.
Also on Monday, Trump threatened to impose a 200% import tariff on French wines after French leader Emmanuel Macron declined an invitation to join the US president's "Board of Peace." European Commission leader Ursula von der Leyen warned on Tuesday that the EU's response would be "unflinching, united, and proportional," maintaining high tensions.
A sell-off in Japanese bonds reverberated through markets, pushing Treasury yields to their highest levels in four months. The dollar fell to a two-week low as the "Sell America" trade returned, while haven demand drove gold and silver to new record highs.
Investors faced a rocky return to trading as the risk of a full US-EU trade war rattled nerves during the start of earnings season. Attention is now turning to the World Economic Forum in Davos, where Trump is reportedly set to hold a meeting with other countries regarding the Greenland crisis. He is scheduled to deliver a key address on Wednesday.
Looking ahead, the Supreme Court may rule as early as this week on whether Trump's use of emergency powers to impose sweeping tariffs is constitutional. Investors are also preparing for a busy earnings schedule, with Netflix results due after market close on Tuesday. Netflix's stock edged up in premarket trading, bucking the broader trend, after it amended its bid for Warner Bros. Discovery's studio to an all-cash offer on Tuesday.