The prospect of new tariffs from the United States has once again unsettled European stock markets, with safe-haven assets like gold benefiting from the heightened uncertainty. On Monday, the FTSE 100 index closed down 0.4%, the FTSE 250 fell 0.9%, and the AIM All-Share declined 0.2%.
The sell-off was triggered by a threat from US President Donald Trump to impose tariffs of up to 25% on countries that do not support his plans to acquire Greenland. Trump said the tariffs would start at 10% from 1 February 2026 and increase to 25% on 1 June 2026 if a deal for Greenland’s purchase is not reached.
European leaders are weighing potential retaliatory measures, with French President Emmanuel Macron’s aides saying they would ask the EU to activate a never-before-used “anti-coercion instrument” that could curb imports of goods and services into the bloc. However, UK Prime Minister Sir Keir Starmer struck a more conciliatory tone, calling for the issue to be resolved through “calm discussion between allies” rather than a trade war.
US Treasury Secretary Scott Berset warned European nations against retaliatory tariffs, saying it would be “very unwise.” Analysts at XTB identified three key risks: a breakdown in transatlantic relations, the potential for Europe to struggle containing Russia if the US walks away from NATO, and the prospect of the US using tariffs randomly to get its way, which would be “a dangerous development for the global economy.”
Despite the market jitters, there were some bright spots. Insurer Beazley was the star performer on the FTSE 100, surging 43% after Zurich Insurance said it had tabled a £7.7 billion bid for the London-listed company. Shares in industry peers Lancashire and Hiscox also rose.
Elsewhere, the International Monetary Fund upgraded its 2026 global growth forecast to 3.3%, the same pace as 2025, citing a boost from tech investments. However, the IMF warned that a re-evaluation of AI productivity gains or renewed trade tensions could bring disruption.
