Tariffs, Greenland dispute jolt US housing and markets

Greenland dispute reignites US-Europe trade tensions

Financial markets faced renewed volatility after President Donald Trump threatened new tariffs on eight European nations, including France, Germany and the U.K., in connection with his latest push for U.S. control of Greenland. The president outlined plans for a 10% levy on a wide range of imports from Feb. 1, rising to 25% in June if European leaders continue to resist U.S. ambitions for the Danish-controlled Arctic territory. The tensions follow Trump’s previous use of tariff threats in negotiations with allies and come as European officials prepare retaliatory measures of their own.

The new threats arrive on top of existing frictions around metals, autos and digital taxes, extending uncertainty for multinational manufacturers and exporters. In parallel with the political rhetoric, U.S. and European militaries have increased activity around Greenland, although the Pentagon has stressed that recent U.S. aircraft deployments to Pituffik Space Base are tied to long-planned exercises coordinated with Denmark and Greenland’s government.

Trade-sensitive sectors are already under pressure from separate geopolitical developments. UBS has warned of a potential DRAM memory chip shortage beginning as early as the second quarter of 2026, with modeled price increases of more than 100% in some cases. The bank sees particular risk for auto suppliers heavily exposed to electronics and advanced driver-assistance systems, and has highlighted additional downside if higher chip input costs are not fully recovered from vehicle manufacturers.

Tariff shock pushes up yields and mortgage costs

The Greenland-linked tariff escalation quickly fed through to fixed income and housing markets. The 10‑year U.S. Treasury yield, a key benchmark for mortgage pricing, climbed more than 4 basis points to 4.275%, helping to lift the average 30‑year mortgage rate by 14 basis points to 6.21% on Tuesday, according to Mortgage News Daily. That move effectively erased a recent decline that had taken mortgage rates close to 6%, their lowest level in three years.

Economists and housing analysts had viewed early‑2026 as a potential turning point for the U.S. housing market after three years of weak sales, contingent on gradually easing rates and reduced volatility. The latest jump in yields has prompted concern that the sector’s nascent recovery could be disrupted again if trade tensions persist or intensify. Commentators noted that mortgage applications had already begun to surge in response to lower rates before the latest reversal.

Market reaction extended beyond housing. U.S. equities fell as investors returned from a holiday weekend to reassess tariff and geopolitical risks, with broad-based selling hitting growth and technology names in particular. Higher long‑term rates increase discount rates applied to future cash flows, disproportionately affecting sectors where valuations depend heavily on earnings further out in time.

Studies show US households absorb bulk of tariff costs

New empirical research is shedding light on who ultimately pays for the administration’s trade measures. A study from the Kiel Institute for the World Economy, based on $4 trillion in shipment data between January 2024 and November 2025, concluded that U.S. consumers and importers bore roughly 96% of the costs of Trump-era tariffs. Foreign exporters absorbed only about 4% through lower prices, the analysis found, with most of the levies passed along the domestic supply chain and ultimately embedded in final prices.

The findings directly challenge repeated claims that other countries are paying for the tariffs, instead indicating that American households are financing the policy through higher costs on imported goods. The researchers attributed the limited foreign price adjustment to factors such as the availability of alternative markets in Europe and Asia and the scale of some U.S. tariff increases, which in certain cases reached or exceeded 50%.

The new Greenland-related measures would add to these existing burdens if implemented, widening the range of consumer products and industrial inputs affected. European governments are already preparing their own tariff response, raising the prospect of a broader trade confrontation between long‑standing allies at a time when other sectors, including autos and semiconductors, are dealing with separate cost and supply challenges.