From Tariffs to Turbulence: Trump’s moves test market nerves again

As President Donald Trump enters the second year of his second term, global markets are once again being rattled by the geopolitical and tariff-related uncertainty that marked his return to power. According to a Reuters report, investors who have grown accustomed to sharp market rebounds are increasingly uneasy that the current bout of volatility could inflict more lasting damage.

Market turbulence intensified after Trump threatened to revive a trade confrontation with Europe, linked to the U.S. administration’s ambitions over Greenland. The remarks unsettled investors and reignited concerns about political and military strains within long-standing Western alliances. Reuters noted that the developments triggered a broad selloff on Tuesday, with equities, long-dated U.S. Treasuries and the dollar all coming under pressure, while volatility indicators climbed across asset classes.

The episode has revived discussion around the so-called “Sell America” trade that gained traction following last year’s “Liberation Day” tariff announcement in April. This time, however, Reuters reported that investors appeared more reluctant to step in and buy the dip, suggesting a shift in market psychology as geopolitical risks resurface.


Market participants told Reuters that the latest selloff bore similarities to last year’s pattern, when equities peaked early in the year before correcting sharply amid escalating tariff headlines. While Trump has previously shown flexibility on trade policy when markets weaken significantly, investors remain concerned that resolving tensions around Greenland could take longer and require greater volatility before clarity emerges.

The selloff has been particularly unsettling because it cut across multiple asset classes simultaneously. Reuters highlighted that the unusual combination of falling equities, a weaker dollar and rising bond yields has forced investors to reassess some long-held assumptions about market resilience and diversification.

On Wednesday, Trump ruled out the use of force in pursuing control over Greenland, while reiterating that no other country could secure the Danish territory. Following those remarks, U.S. stocks and the dollar recovered some of the losses suffered in the previous session, Reuters said.

Despite the rebound, concerns remain elevated. The S&P 500’s 2.1% drop on Tuesday marked its steepest one-day decline in more than three months, with dip-buyers notably absent. After three consecutive years of double-digit gains, valuations remain stretched, leaving equities vulnerable to adverse headlines.

Still, few investors are prepared to abandon U.S. stocks entirely, Reuters reported. Many see diversification outside the U.S. as sensible at the margin, while continuing to view American companies as fundamentally strong and highly profitable.

Corporate earnings expectations also remain supportive. According to LSEG IBES data cited by Reuters, S&P 500 earnings are forecast to rise 13.3% in 2025, followed by a further 15.5% increase in 2026 as fourth-quarter reporting gets underway.

That said, a sustained pullback by foreign investors could weigh on market performance. Reduced overseas inflows into U.S. equities could dampen returns, even if the underlying corporate fundamentals remain solid.

For now, most investors appear to be taking a wait-and-watch approach. Reuters reported that while risks are clearly rising, many believe markets have not yet reached a point that would justify a major shift in positioning.

Another factor tempering aggressive selling is the belief that Trump may ultimately negotiate down from his initial stance. Reuters noted that traders remain wary of committing fully to bearish positions due to Trump’s history of escalating threats before retreating, a dynamic that has repeatedly shaped market reactions.

As uncertainty persists, investors are bracing for further volatility, balancing the risk of geopolitical escalation against the possibility that any sharp downturn could once again attract bargain hunters.

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