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U.S. stocks closed sharply lower on January 20, with the entire S&P 500 hitting a three-month low as investors worried about President Donald Trump’s tariff threats aimed at taking over Greenland.
President Trump announced on January 17 that an additional 10% import tariff would be imposed on products from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom on February 1st, rising to 25% on June 1st. These countries are already subject to U.S. tariffs and oppose plans to acquire Greenland.
Separately, Trump threatened to impose 200% tariffs on French wine after reports that President Emmanuel Macron was reluctant to join a peace commission to monitor Gaza.
The S&P 500 index fell 2.06%, or 143.15 points, to close at 6,796.86, while the tech-heavy Nasdaq fell 2.39%, or 561.065 points, to close at 22,954.322. The blue-chip Dow Jones Industrial Average fell 176%, or 870.74 points, to end at $48,488.59.
“It’s probably a bit premature to shake off the ‘Sell America’ theme, where the US government’s pursuit of Greenland is seen as a spectacular own goal, such as the nearly 50% tariffs imposed on Liberation Day last April,” said Chris Turner, head of global markets at Dutch bank ING.
Government bond yields, gold prices soar
The dollar and U.S. Treasuries also fell as investors fled U.S. assets, but safe-haven gold rose to a record high of more than $4,700 an ounce. Government bond prices move in the opposite direction to yields, so a fall in bond prices means a rise in yields.
The yield on the benchmark 10-year U.S. Treasury soared to 4.293%, but “until it gets above 4.50%, we’re really OK,” said Tom Essay, founder of Sevens Report on markets. “If yields continue to rise, headwinds for markets and the economy will increase.”
John Higgins, chief market economist at research firm Capital Economics, said that to get Trump’s attention, “the U.S. Treasury market in particular may need to come under even more pressure, as it did on ‘Emancipation Day,’ to encourage the president to step down.”
Economy remains strong
Despite the increased volatility, economists expect the U.S. economy to remain resilient.
“The Goldilocks economic indicators continued last week, which has an important fundamental positive and somewhat calming effect on the market amidst the recent headline turmoil,” Essay said. “As long as economic indicators remain in this Goldilocks state, the likelihood of a prolonged decline in stock prices will remain low.”
On January 22, the government is scheduled to release more inflation data, namely the Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditures Price Index.
Hank Smith, director and head of investment strategy at Haverford Trust, said the data is consistent with cooling inflation and expects rate cuts to be on the table later this year.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. You can contact her at mjlee@usatoday.com. You can also subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
