U.S. Stocks Surge as Trump Withdraws Tariff Plan Targeting Europe

Stocks slide, bond prices rise, prompting tariff withdrawal

U.S. President Donald Trump said on Jan. 21 (local time) that he had "decided not to impose" tariffs that were set to take effect on Feb. 1 against eight European countries, sending equities sharply higher.

Attending the World Economic Forum (WEF) Annual Meeting—better known as the Davos Forum—in Davos, Switzerland, Trump posted on his social media platform Truth Social that, "based on a very productive meeting with NATO Secretary General Mark Rutte, we have created a framework for a future agreement regarding Greenland and virtually the entire Arctic region," announcing the tariff rollback.

Trump added that "if this solution is realized, it will be very beneficial to the United States and all NATO member countries." He also said that "additional discussions are under way" on the Golden Dome (the U.S. next-generation aerial missile defense system) to be applied to Greenland, adding that "more information will be provided as discussions progress." In his Davos Forum speech that day, Trump reiterated his claim that the United States should have ownership of Greenland, while saying he would not use military force to achieve it.

Earlier, on Jan. 17, Trump said he would impose U.S. tariffs on eight countries—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland—that had deployed troops to Greenland, at 10% from Feb. 1 and 25% from June 1.

Markets weakened on Jan. 19–20 as Trump stepped up pressure on Europe, but stocks rebounded strongly after news of the tariff withdrawal. The S&P 500 was trading around 6,885 as of 3:30 p.m., up 1.3% from the previous session. It briefly jumped to around 6,915 before paring gains.

Small caps posted particularly strong gains. Energy-sector shares also climbed to near record highs. Treasury yields, which have served as a channel for markets to signal warnings about Trump’s aggressive foreign policy, also reacted. The 10-year U.S. Treasury yield fell 4 bp to 4.25%. Bloomberg reported strong demand at an auction of $13 billion in 20-year Treasuries. As U.S. equities and bonds rose, the dollar index (DXY) also gained 0.19%.

Cryptocurrency prices also rebounded sharply. Bitcoin rose about 1.7%, while Ether climbed roughly 2.6%.

Washington=Lee Sang-eun, correspondent