Trump’s Davos Turn Lifts Markets, Tempers Tariff Fears

Markets Rebound as Trump Pauses Greenland-Linked Tariffs

U.S. equities rallied on Wednesday after President Donald Trump announced he would not proceed with new tariffs on several European nations that had been scheduled to take effect on February 1. The levies had been threatened in connection with his push for U.S. control over Greenland. In a post on his Truth Social platform, Trump said he had formed the “framework of a future deal” on Greenland and the Arctic region following talks with NATO Secretary General Mark Rutte, and therefore would halt the planned duties.

The S&P 500 gained 1.16% to close at 6,875.62, the Dow Jones Industrial Average rose 1.2% to 49,077.23 and the Nasdaq Composite advanced 1.18% to 23,224.82. All three indexes recovered roughly half of Tuesday’s losses, when fears of a new round of tariffs had driven the S&P 500 to its worst daily decline since October. Small caps outperformed, with the Russell 2000 up 2% on the day and 8.7% year to date.

The relief rally left the S&P 500 modestly positive for 2026 to date, while the Nasdaq remained fractionally lower for the year. Despite the rebound, the S&P 500 was still down 0.9% for the week, reflecting volatility around shifting trade rhetoric.

Safe-Haven Gold Spikes Before Easing on Diplomatic Signal

Ahead of Trump’s remarks at the World Economic Forum in Davos, investors moved into traditional havens. Gold prices climbed as much as 2.7% intraday to a record $4,888 per ounce, with analysts citing concerns that the Greenland dispute and potential tariffs could damage trust in established trade arrangements.

Daniel Ghali of TD Securities said the move reflected a broader issue of confidence, arguing that “Gold’s rally is about trust. For now, trust has bent, but hasn’t broken. If it breaks, momentum will persist for longer.” After Trump explicitly ruled out using military force to obtain Greenland and withdrew the immediate tariff threat, equity markets firmed and safe‑haven demand eased, though bullion remained near its highs.

Oil prices were relatively steady through the session. Brent crude traded just below $65 a barrel, little changed, as the clarification on tariffs reduced the prospect of an abrupt shock to near‑term energy demand.

Ongoing Trade and Policy Risks Temper Investor Optimism

While markets welcomed the pause on new duties, commentary from officials and analysts highlighted lingering trade risks. Jefferies warned that a pending U.S. Supreme Court ruling on the administration’s use of emergency powers for tariffs could still surprise investors if it upholds broad authority, potentially “green‑lighting continued use of tariffs as policy leverage.”

U.S. Treasury Secretary Scott Bessent said in Davos that the U.S. would not outsource its security interests and pointed to “glitches” in the existing U.S.–UK trade framework following Britain’s decision to transfer the Chagos Islands to Mauritius. He added that no new trade talks with the UK were currently scheduled, although he reiterated that the size of Denmark’s U.S. Treasury holdings, which one Danish pension fund is selling, was “irrelevant” to broader markets.

Despite Wednesday’s equity gains, AJ Bell noted that “the risks of an all‑out trade war look to be escalating,” pointing to the European Parliament’s postponement of a vote to ratify its trade deal with the U.S. as an additional source of uncertainty for investors.

Global Leaders Flag Wider Economic Implications

Beyond immediate market moves, central bankers and asset managers in Davos raised concerns about how rising protectionism could affect longer‑term investment trends. European Central Bank President Christine Lagarde said large artificial intelligence investments depend on scale and cross‑border data access, warning that stricter privacy laws and trade barriers could “significantly” undermine expected productivity gains from AI.

BlackRock chief executive Larry Fink echoed those concerns, arguing that Western economies need to cooperate and scale AI infrastructure to compete effectively with China. He said the volume of capital flowing into AI should continue, but cautioned that fragmentation in standards and access could limit the benefits if countries pursue divergent regulatory paths.

Against that backdrop, Wall Street’s rebound on Trump’s tariff reversal was seen as a tactical response to reduced near‑term risk. Strategists suggested that investors remain sensitive to shifts in U.S. trade and foreign policy, given their potential to influence both corporate earnings and long‑horizon themes such as AI, data flows and supply‑chain investment.