MW Trump's Greenland tariff threats rattle investors: The stakes are higher this time around
By Quentin Fottrell
Retail investors don't welcome the prospect of a prolonged trade war, but don't freak out when you check your 401(k)
President Trump said Saturday that, beginning on Feb. 1, he would impose tariffs on goods being imported to the U.S. from eight European countries.
President Donald Trump has threatened to ignite a global trade war.
Again.
In his push for the U.S. to take over Greenland, a self-governing territory within the Kingdom of Denmark, Trump wrote on Truth Social on Saturday that, beginning on Feb. 1, he would impose tariffs of 10% on imports to the U.S. from eight European countries that have expressed opposition to his ambitions. Those tariffs would increase to 25% on June 1 and remain in place until a deal is put in place for Greenland.
Everything new is old again. We've been here before, although the stakes seem higher this time around, given that these economic policies are being used to annex a territory whose defense is covered by NATO's collective-security guarantees. Denmark is a founding member of the North Atlantic Treaty Organization, and the latest rift in the decades-long Western alliance threatens the very raison d'etre of that organization.
The market reaction to the latest tariff threats has unsettled some investors while seeming entirely predictable to others. Fears of a more aggressive trade war lent support to the euro, sterling, and other European currencies. Meanwhile, the U.S. dollar DXY, already under pressure, weakened on Tuesday reigniting fears of a "Sell America" trade and raising concerns that escalating geopolitical tensions will increase the cost of goods and services for corporate America and, ultimately, consumers.
It's hard to begrudge the occasional heartfelt lament from hardworking Americans when they check their 401(k) balances.
Anxious retail investors, retirees and millions of workers with 401(k)s should train their eyes on the months, even years ahead. Trump's "liberation day" on April 2, 2025 resulted in a monthlong tumble in the markets with some retail investors running for the hills; others sought out gold in lieu of equities - a decision that, in fairness, did not work out so badly given the momentum in the price of gold over the last year.
Those nearing retirement will understandably be gagged by Trump's threat to impose more tariffs, given how the market reacted last April. Nine months ago, the S&P 500 SPX, Dow Jones Industrial Average DJIA, tech-heavy Nasdaq Composite COMP and small-cap Russell 2000 RUT took the brunt of the uncertainty and, possibly, frustration on Wall Street. The market did not regain its February 2025 high until June 27.
No new retirees want to withdraw money from their accounts in a down market, and not everyone has additional funds to dip into while they wait out market turmoil. The collective balance of America's 401(k)s tops $10 trillion and accounts for one-fifth of total retirement assets, so it's hard to begrudge the occasional heartfelt lament from hardworking Americans. For someone in their 60s, the average 401(k) balance is roughly $580,000 (with a median of closer to $187,000).
But anyone who panicked last April and sold stocks, rushing into safer havens, likely spent the latter half of 2025 regretting their decision. "Diversity," "risk tolerance" and all those other buzzwords we're so tired of hearing about from financial advisers are designed for times like this. If you are in your 60s, you should probably have anywhere from 30% to 60% of your savings in equities to help protect against such market corrections.
Don't miss: Are you middle class? No, you're not. Here's why.
The Moneyist: "There are some silver linings, of course, even in the latest orchestral round of trade-war maneuvers."
Uncertainty and volatility
There's no one-size-fits-all approach, but the rule of 120 stipulates that you can subtract your age from 120 to give you an approximate weighting in equities that would match your age. (It's also known as the "100 minus age rule," so opinions do differ. It's meant as a guide.) In periods of renewed market turbulence, investors who have not adequately diversified or hedged their portfolios may have to forego any immediate plans to retire.
E.U. leaders are preparing to meet this week to discuss retaliatory measures against Trump, targeting over $100 billion in U.S. goods, and mulling a never-before-used anti-coercion instrument or "trade bazooka," which would limit economic access to the E.U. bloc. Meanwhile, the U.S. Supreme Court could issue a ruling as early as this week on the legality of using the International Emergency Economic Powers Act to impose tariffs.
At times of geopolitical unrest, analysts recommend defense, healthcare, utilities and consumer-staples stocks, in addition to mid- and small-cap equities, bonds, cash and, lest we forget, non-U.S. equities (up to 25% in developed non-U.S. stocks and 5% in emerging markets). Helped by tech giants, U.S. stocks have significantly outperformed European markets over the last decade, but there are no guarantees that will continue.
U.S. stocks have significantly outperformed European markets over the last decade, but there are no guarantees that will continue.
The E.U. and U.S. have the largest bilateral trade and investment relationship in the world and, while all bets appear to be off, these two economies are still largely dependent on each other. Europe is arguably more dependent on the U.S. for security, and the global implications on U.S.-based portfolios (and 401(k)s) have yet to be determined, especially over the next three years of the Trump presidency. Analysts speculate that some investors may indeed shy away from the "buy America" trade.
Many analysts say a strong response is required. "At least judging from the first reactions, some European leaders are willing to play hardball," Carsten Brzeski, global head of macro at ING, wrote in a note to clients on Sunday. Stating the obvious, he added, "For businesses, the developments over the weekend mean another period of uncertainty around investments in and exports to the U.S." That could last until 2028, and beyond.
The Cboe Volatility Index VIX, regarded as a "fear gauge" or key indicator of the market's volatility, was approaching 20 on Tuesday, up from 14 earlier in the year. It's still a far cry from when it closed at over 50 shortly after liberation day. Volatility is a reflection of fear and/or uncertainty in the market, and as long as that persists, so, too, will dramatic fluctuations. Many traders have baked in at least some of Trump's curveballs.
There are some silver linings, of course, even in the latest orchestral round of trade-war maneuvers. Defense stocks, which have experienced a boost since Russia invaded Ukraine in 2022, have also benefited from the war of words over Greenland. Gold prices rose more than 3% to above $4,764 an ounce on Tuesday, hitting a record high as investors once again flocked to an asset regarded as a safe haven during times of geopolitical unrest.
As far as safe havens go, never overlook the power of time and equanimity.
More columns from Quentin Fottrell:
Trump says affordability is a 'hoax,' but consumers should expect more pain in 2026
'A friend calls it the everything bubble': Why do economists fear a 1929-style crash?
America is divided into Trump's pro-billionaires and Mamdani's anti-billionaires
-Quentin Fottrell
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 20, 2026 22:49 ET (03:49 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
