A senior Trump administration official has dismissed the intense market reaction to the President's latest tariff announcement as "hysteria," even as London's blue-chip index tumbled into the red on Tuesday morning.
Market Panic Meets Official Dismissal in Davos
Speaking at the World Economic Forum in Davos, US Treasury Secretary Scott Bessent compared the fallout to the panic seen on April 2nd, 2025 – dubbed 'Liberation Day' – when the White House first launched a broad economic offensive. "I would say this is the same kind of hysteria that we heard on April 2nd. There was a panic," Bessent stated. He urged observers to "sit back, take a deep breath, and let things play out."
This call for calm came as European markets reeled from President Trump's confirmation of sweeping new levies. The UK, alongside Denmark, Norway, Sweden, France, the Netherlands, Finland, and Germany, now faces a fresh 10 per cent tariff. The punitive measure is a direct response to those nations' efforts in defending Greenland's sovereignty.
FTSE 100 Feels the Immediate Heat
The financial impact was swift and severe. The FTSE 100 slid 1.4 per cent by 10am on Tuesday 20 January 2026, extending losses from Monday. The decline was led by significant drops in shares of international equipment rental firm Ashtead and engineer Spirax, both down around three per cent.
This decisive action marks a shift from 2025, when markets coined the acronym TACO trade – 'Trump Always Chickens Out' – after the President rowed back on earlier tariff threats. However, Trump has now said he will "100 per cent" carry out the new European levies if no agreement on Greenland is reached.
"The so-called Trump always chickens out trade was popular last year with global investors playing market volatility to their advantage, but the Trump of 2026 seems to act more decisively," said Emma Wall, chief investment strategist at Hargreaves Lansdown. She pointed to recent military action in Venezuela as evidence of the President following through on his statements.
A Diplomatic Tightrope for Europe
European leaders now face a delicate balancing act. They must protect Greenland's sovereignty while attempting to avert a full-blown transatlantic trade war. Diplomatic channels are active, with Trump noting a "good" call with NATO Secretary General Mark Rutte. European leaders are set to meet in Davos to coordinate their response.
Meanwhile, Prime Minister Keir Starmer is seeking to maintain "calm" diplomatic relations with the US administration despite the furious posts and threats. He has rejected suggestions that Trump is preparing military action against the Danish territory, a stance echoed by US House Speaker Mike Johnson, who also played down invasion rumours.
The situation is further complicated by Trump's foreign policy approach. Despite labelling China and Russia as threats to US national security regarding Greenland, the President has confirmed inviting their leaders, Vladimir Putin and Xi Jinping, to join a Gaza 'Board of Peace'. With Trump scheduled to speak in Davos tomorrow, analysts like Emma Wall warn of further potential "market turmoil" ahead.
