It is not only Europeans who are strained by Donald Trump's new threats to impose tariffs on goods from countries that do not do as he says. Investors are also now reacting to Trump's announcement from Saturday that he would impose a ten percent tariff on imports from Denmark and seven other European countries if the United States does not get Greenland.
The US stock market was closed on Monday, as it was a holiday in the US. Therefore, it is only today that investors' verdict on Trump has been read. And it is not positive at all. US stocks are falling, just as the dollar has also fallen, while government yields have risen.
At the market's opening, the broad S&P 500 index is down 1.3 percent, while the tech-heavy Nasdaq index is down 1.6 percent. This is an expression of some investors selling out of their American investments for fear that the threats will be translated into action, assesses Tine Choi Danielsen, chief strategist at PFA Pension.
- Something similar happened when the tariff war was kicked off in April last year. At that time, American stocks certainly fell much further, and we are still in the small things department this time. Many are probably waiting to see what Europe's response will be. Therefore, developments in the coming days will show whether the conflict escalates or whether it goes the other way, she says.
Tine Choi believes that the reaction of investors could potentially mean that the tariff threat remains a threat.
- We know that Trump has a habit of backing down again if the markets react negatively. He is keeping an eye on interest rates, exchange rates and share prices. That's what disciplined the Americans last time, and you could easily see something similar play out this time if the trend continues, she estimates.
PFA has previously sold off its holdings of US government bonds, but so far the latest announcements from Trump have not led to further divestments of US assets.
- We think that the uncertainty is far too great right now to act on what we know for now. And the tariffs that have been announced so far will certainly not send Europe into recession. But we are monitoring the situation very closely, and I would not rule out that we may change our approach if we assess that it will benefit our customers' pension savings. In the first instance, we will see what the EU does, and then we will take stock of the situation when we know more, she says.
/ritzau/
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