#TrumpWithdrawsEUTariffThreats

January 21–22, 2026 | Macro → Markets Impact Update
On January 21–22, 2026, U.S. President Donald Trump abruptly withdrew proposed tariff threats against several European nations, a move initially linked to U.S. strategic interests in Greenland.
The proposed tariffs were aggressive:
10% initially
Up to 25% by mid-year if negotiations failed
While the withdrawal reduced the immediate risk of a transatlantic trade war, markets did NOT react calmly. Instead, we saw volatility, liquidity stress, and sharp cross-asset price swings.
1️⃣ Origins of the Tariff Tension
The conflict escalated in mid-January when the U.S. announced baseline tariffs on imports from Germany, France, and the UK, framed as geopolitical leverage.
In response:
The EU threatened retaliatory tariffs on ~$93B of U.S. exports
Markets immediately priced in 2018-style trade war risks
Global supply chain disruption fears resurfaced
2️⃣ Why Markets Stayed Volatile (Even After Withdrawal)
Despite the reversal, uncertainty dominated due to:
🔹 Policy Unpredictability
A threat → reversal within 48 hours shook institutional confidence. Funds rotated out of equities into gold and U.S. Treasuries.
🔹 Inflation Expectations
Even talk of tariffs signals:
Higher future input costs
Sticky inflation
Prolonged high interest rates
This is structurally negative for growth assets.
🔹 Supply Chain Anxiety
Global giants (Apple, Tesla, Nvidia) rely on stable transatlantic trade. Sudden policy shifts:
Increase hedging & contingency costs
Compress margins
Weigh on valuations
3️⃣ Price, Volume & Liquidity Impact
📉 Equities (During Escalation)
S&P 500: −2.1%
Nasdaq: −2.4%
Dow Jones: −1.8%
Liquidity thinned, bid-ask spreads widened, VIX spiked.
➡️ After withdrawal: modest relief rally, but political risk premium stayed elevated.
🟡 Gold (Safe Haven)
Surged above $5,080/oz (+2.6–2.7%)
Institutional inflows surged
Retraced ~1.1% post-withdrawal
➡️ Confirms gold’s role as policy-risk insurance.
₿ Cryptocurrencies
Bitcoin: −2.6% to −3.6%, bottom near $86,000
Ethereum: Dropped to $2,830
Liquidations: ~$875M in leveraged longs wiped out
➡️ Risk-off sentiment + leverage = instant liquidity drain.
💵 Forex & USD
USD weakened vs JPY & CHF
Safe-haven FX volumes surged
Partial rebound after withdrawal
4️⃣ Sector-Specific Impact
Automotive: German auto stocks highly volatile
Tech: Earnings outlooks temporarily revised down
Commodities: Gold strong, oil choppy
Crypto: High leverage amplified downside moves
5️⃣ Macro Implications
Inflation Risk: Tariff threats reprice future costs
Liquidity Stress: Risk-off flows widen spreads
Political Risk Premium: Markets now hypersensitive to policy headlines
6️⃣ Market Reaction Snapshot
Date
Asset
Move
Post-Withdrawal
Notes
Jan 20
S&P 500
−2.1%
Partial rebound
Risk-off selling
Jan 20
Nasdaq
−2.4%
Partial rebound
Tech hit hardest
Jan 20
Gold
+2.6–2.7%
~$5,080
Safe-haven peak
Jan 20
BTC
−2.6–3.6%
~$86K
~$875M liquidations
Jan 20
ETH
−3%
~$2,830
High volatility
Jan 20
USD
Soft
Partial rebound
JPY/CHF inflows