Investors aren’t so sure about the TACO trade anymore.
After spending much of 2025 doubting the president over everything from tariffs to threats to fire Jerome Powell, investors are feeling very anxious about Donald Trump’s fight over Greenland.
The sell America trade was in the spotlight again on Tuesday amid the latest turmoil.
US stocks plunged as investors took in the latest tariff threats targeting eight European Union countries if Denmark doesn’t put Greenland up for sale by the start of February. EU leaders have discussed hitting back with tariffs of their own.
Major indexes were down sharply. The Dow dropped more than TK points as traders reacted to the latest developments and sought shelter in defensive assets like gold and silver.
Long-dated US Treasury yields spiked, while the US dollar declined against a basket of other currencies.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Tuesday:
Here were other notable moves across the market:
New tariffs
Tom Brenner/Getty Images
Until now, investors had mostly brushed off Trump’s talk of taking over Greenland.
That seems to have changed now that tariffs are back in the picture.
In a post on Truth Social on Saturday, Trump said eight NATO countries, including Denmark, would face a 10% tariff on goods exported to the US in February, with the rate increasing to 25% in June if Denmark doesn’t agree to “the Complete and Total purchase of Greenland.”
“The United States has been trying to do this transaction for over 150 years,” the president wrote on his social media platform over the weekend, pointing to new defense initiatives that make acquiring Greenland “especially important” for the US.
“The United States of America is immediately open to negotiation with Denmark and/or any of these Countries that have put so much at risk, despite all that we have done for them, including maximum protection, over so many decades,” he continued.
The sell-off has largely been driven by investors trimming their exposure to US equities now that tariffs, a major concern for markets all throughout last year, appear to be on the table, David Morrison, a senior market analyst at Trade Nation, wrote in a note on Tuesday.
Investors also seem worried that the Supreme Court ruling on Trump’s reciprocal tariffs could add further volatility in markets, he added.
“The US President upped his aggressive rhetoric overnight,” Morrison said of the selling pressure. “While some on Wall Street argue any tariff-driven sell-off could be a buying opportunity as the earnings season picks up steam, the scale and breadth of Trump’s rhetoric have unsettled risk appetite.”
The latest tariff threats are also driving a flight to safe-haven or defensive assets, like metals. Gold rose another 3% while silver jumped 8%.
“Global investors are clearly adding to the risk premium embedded in US assets, and diversification flows are picking up,” Karl Schamotta, the chief market strategist at Corpay Cross-Border Solutions, wrote in a note.
Elsewhere, a bond scare
A major move in Japan’s bond market also contributed to some of the volatility in the US. The yield on Japan’s 40-year government bond hit a record 4.21% on Tuesday as investors weighed a new tax cut proposal that has raised concerns about the nation’s growing deficit.
The nation’s 10-year government bond yield also increased by more than 10 basis points to trade around 2.38%, a level that hasn’t been seen in 27 years.
Rising yields in Japan have sparked fresh concern about the amount of foreign capital flowing into US markets. Specifically, investors are worried about the unwinding of the yen carry trade, a popular strategy in which traders borrow money at low rates in Japan to deploy in markets that offer higher returns, such as the US.
“As a sliding yen triggers intervention chatter, the fate of the massive ‘yen-carry trade‘ hangs in the balance,” Ed Yardeni, the President of Yardeni Research, wrote in a note to clients over the weekend.
