On Saturday, Trump said the U.S. would impose a 10% tariff from 1 February 2026 on imports from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland, escalating the levy to 25% from 1 June if those countries refuse to negotiate the sale of Greenland, a Danish territory. The announcement, made in a social media post, marked Trump’s most aggressive attempt yet to pressure Europe over the strategically important Arctic island.
Tariffs as leverage
Trump said the tariffs would remain in place “until a Deal is reached for the Complete and Total purchase of Greenland,” arguing that U.S. control of the island is essential to counter Chinese and Russian ambitions in the Arctic. Denmark and its European allies have rejected those demands, triggering a rare show of unity among European leaders, who reacted with outrage on Saturday.
The threat also drew criticism from U.S. lawmakers, including some members of the president’s own party. Adding to the uncertainty, the U.S. Supreme Court is currently weighing whether to overturn the legal authority Trump has used to threaten tariffs under the International Emergency Economic Powers Act. If the court rules against him, Trump may not be able to impose the new levies.
The proposed duties would likely be imposed on top of existing tariffs, currently 10% on British imports and 15% on imports from the European Union, raising questions about retaliation and the broader impact on global trade. While tariffs are paid by importers, the costs are often passed on to American consumers, complicating the inflation outlook.
Safe havens back in demand?
For investors, the immediate reaction has been a renewed bid for safe-haven assets. Market participants say the Greenland tariff threat risks escalating geopolitical tensions, a backdrop that tends to support precious metals.
Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities, said gold has remained resilient amid a mix of global flashpoints. “Gold traded in a flat-to-positive range, holding firm near Rs 1,43,150 in MCX and around $4,605 on Comex, as prices comfortably sustained above the $4,600 mark,” he said.
“Ongoing geopolitical uncertainty between the U.S. and Iran continues to lend support, even as Washington indicated no immediate military intervention if Iran refrains from escalating actions,” Trivedi added. “However, the situation remains fluid with additional global flashpoints, including renewed strategic focus on Greenland, keeping risk sentiment elevated.”In such an environment, he said, gold continues to attract “premium safe-haven demand as an alternative to the dollar,” with prices expected to remain volatile in a broad range of Rs 1,41,000–Rs 1,45,000 in the near term as markets approach the U.S. Federal Reserve’s January policy meeting. Silver, often tracking gold during periods of heightened uncertainty, is also expected to stay sensitive to geopolitical developments.
India: Volatility now, opportunity later?
For Indian equities, the implications are more mixed. Market experts expect near-term volatility if Trump’s tariff threats spill into a wider trade conflict, but see potential long-term positives emerging from the disruption.
According to analysts, the standoff could accelerate negotiations on a long-pending India–EU Free Trade Agreement, with talks already in their final stages. After Trump’s tariff threats against European countries, the EU and India are expected to push to finalise a concrete deal. Over time, such an agreement could boost India’s economy across sectors, including pharmaceuticals, textiles, gems and jewellery, steel and metals, automobiles, solar equipment and leather.
Indian markets ended this week on a cautiously positive note despite global uncertainty. The Sensex rose 188 points, or 0.23%, on Friday to close at 83,570.35, while the Nifty gained 29 points, or 0.11%, to end at 25,694.35, snapping a two-session losing streak. The recovery was led by strong buying in IT and banking stocks, with Infosys, TCS and Tech Mahindra among the top gainers.
Earnings, data and global cues ahead
Vinod Nair, Head of Research at Geojit Investments, said investor sentiment has been swinging between optimism and caution. “Indian equities ended the week with marginal gains, as sentiments oscillated between optimism over renewed India–US trade discussions and caution stemming from persistent geopolitical tensions,” he said, noting that prolonged global tensions have made foreign institutional investors more risk-averse toward emerging markets and added upward pressure on bond yields.
Looking ahead, Nair said market sentiment would be shaped by global macro indicators such as U.S. PCE inflation, GDP data and jobless claims, which will offer cues on the Federal Reserve’s rate outlook. Domestically, PMI readings, corporate earnings and management commentary will be closely watched.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
