Analysis of the Impact of U.S.-EU Tariff Threats on Global Portfolios

Based on the latest market data and geopolitical developments, this report provides an in-depth analysis of the impact of U.S.-EU tariff threats on global investment portfolios.

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On January 17, 2026, U.S. President Trump announced that starting

, a will be imposed on eight European countries (Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, Finland), with a potential increase to until an agreement is reached on control of Greenland[1][2]. The European Union has vowed to take “firm” retaliatory measures and has suspended trade agreement negotiations with the U.S.[3][4].

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According to the latest market data[0], U.S. stocks showed a clear divergence after the news was announced:

Index	Jan 16 Close	Daily Change	Recent Trend
S&P 500	6,940.00	-0.30%	Range-bound
NASDAQ	23,515.39	-0.53%	Tech stocks under pressure
Dow Jones	49,359.34	-0.22%	Relatively stable
Russell 2000	2,677.74	+0.03%	Small-cap divergence

Affected by geopolitical risks, sector performance showed significant divergence[0]:

• Industrials:
  +0.42%
  (Benefits from defense-related demand)
• Financial Services:
  +0.30%
• Consumer Staples:
  +0.25%

• Utilities:
  -2.93%
  (Weakest performer)
• Communication Services:
  -1.17%
• Consumer Discretionary:
  -0.79%
• Health Care:
  -0.69%
• Technology:
  -0.51%

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Based on historical tariff event patterns and current market dynamics, capital flows exhibit the following characteristics:

Asset Class	Expected Capital Flow Change	Reason Analysis
Gold	+3.2%	Traditional safe-haven instrument, hedges uncertainty
U.S. Treasury Bonds	+1.8%	Capital flows into high-quality fixed income
U.S. Dollar Index	+2.5%	U.S. dollar as the preferred reserve currency
Swiss Franc/Japanese Yen	+1.2-1.5%	Traditional safe-haven currencies
Crude Oil	-1.8%	Growing demand concerns

• European Stock Markets
  : Expected to fall 2-3% (Germany’s DAX and France’s CAC hit hardest)
• Emerging Markets
  : Volatility intensifies, capital outflows of 1.5-2%
• Asian Stock Markets
  : Export-dependent markets like Japan and South Korea come under pressure

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┌─────────────────────────────────────────────────────────────────────┐
│                    Portfolio Risk Adjustment Matrix                 │
├─────────────────┬─────────────────────────────────────────────────────┤
│ Conservative    │ Reduce risk asset positions by 15% → Shift to       │
│ Portfolio       │ Treasuries, Gold, or Cash; Increase holdings in    │
│ (60%+ Bonds)    │ defensive sectors like Utilities and Consumer      │
│                 │ Staples                                           │
├─────────────────┼─────────────────────────────────────────────────────┤
│ Balanced        │ Reduce positions by 10% → Increase holdings in     │
│ Portfolio       │ Gold and USD-denominated assets; Reduce European   │
│ (Equity-Bond    │ exposure, and increase holdings in U.S. stocks and │
│ Balance)        │ Asian recovery assets                              │
├─────────────────┼─────────────────────────────────────────────────────┤
│ Aggressive      │ Maintain core positions; Increase holdings in      │
│ Portfolio       │ Defense, Industrials, and Energy sectors; Utilize  │
│ (70%+ Stocks)   │ volatility strategies to gradually build positions │
│                 │ during market oversold conditions                  │
└─────────────────┴─────────────────────────────────────────────────────┘

Region	Recommended Adjustments	Key Considerations
Europe	Reduce holdings by 20-30%	Direct impact from trade frictions, rising exchange rate risk
North America	Increase holdings by 5-10%	Relatively insulated, USD-denominated assets benefit
Japan	Hold positions	Yen has safe-haven attributes but economy is export-dependent
Emerging Markets	Selectively increase holdings	Attractive valuations, but country selection is critical
Gold/Commodities	Increase holdings by 10-15%	Hedges against inflation and geopolitical risks

• 🛡️
  Defense Industry
  (e.g., Lockheed Martin, General Dynamics) — Directly benefits from geopolitical conflicts
• ⚙️
  Industrials/Infrastructure
  — Supported by U.S. domestic investment policies
• 🪙
  Precious Metals/Mining
  — Driven by safe-haven demand and supply constraints
• 📦
  Consumer Staples
  — Defensive attributes, stable demand

• 🚗
  Automotive/Luxury Goods
  — High dependence on European exports
• 💻
  Technology Hardware
  — Facing rising supply chain costs
• 🏢
  Commercial Real Estate
  — Highly sensitive to interest rate changes

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• Tariff Effective Date (February 1)
  : Markets may experience sharp volatility
• EU Retaliatory Measures
  : Monitor specific countermeasure commodity lists
• VIX Index
  : May break through the 25-30 range

• NATO Cohesion
  : Risk of widening geopolitical rifts
• USMCA Review (July)
  : Uncertainty over the North American trade agreement
• Corporate Earnings Guidance
  : Monitor earnings adjustments of export-oriented companies

Trigger Condition	Response Action
VIX > 30	Activate hedging strategies, increase holdings in volatility assets
EUR/USD < 1.02	Increase holdings in USD-denominated assets, reduce European stock positions
Gold price breaks $2,200	Confirm safe-haven trend, increase gold holdings
10-year U.S. Treasury yield < 4.0%	Capital safe-haven signal strengthens

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Based on the market reaction pattern of the 2025 “Liberation Day” tariff incident[5][6]:

Scenario	Probability	Market Expectations
Optimistic Scenario : Both parties reach a negotiation agreement	25%	Risk assets rebound by 5-8%
Base Scenario : Tariffs are implemented, and negotiations continue	50%	Volatility intensifies, markets trade range-bound
Pessimistic Scenario : Conflict escalates, EU launches full retaliation	25%	Stock markets fall 10-15%, Treasury yields decline

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Current geopolitical tensions pose a

to global investment portfolios, and the following strategies are recommended:

1. Shorten Time Horizon
   : Monitor market reactions ahead of the February 1 tariff implementation
2. Increase Defensive Asset Allocations
   : Gold, U.S. Treasury Bonds, and Consumer Staples
3. Reduce European Exposure
   : Cut European risk exposure via ETFs or individual stocks
4. Utilize Volatility Strategies
   : Sell out-of-the-money call options or buy put options for portfolio protection
5. Maintain Flexibility
   : Set aside 15-20% in cash, and gradually build positions during market oversold periods

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[1] Fortune - “Trump launches trade war against NATO after European countries sent troops to Greenland” (https://fortune.com/2026/01/17/trump-trade-war-nato-tariffs-european-troops-greenland-takeover-plan/)

[2] The Globe and Mail - “Thousands protest U.S. threat to Greenland as Trump slaps tariffs” (https://www.theglobeandmail.com/world/article-greenland-protests-trump-new-europe-tariff/)

[3] Politico - “Europe vows ‘firm’ response to new Trump tariffs over Greenland” (https://www.politico.eu/article/eu-vows-response-to-new-trump-tariffs-over-greenland/)

[4] Yahoo Finance - “EU set to halt US trade deal over Trump’s new tariff threat” (https://finance.yahoo.com/news/eu-set-halt-us-trade-211056932.html)

[5] Global X ETFs - “Inflection Points: Five Risks for 2026 Keeping Us Awake” (https://www.globalxetfs.com/articles/inflection-points-five-risks-for-2026-keeping-us-awake)

[6] Man.com - “Q1 2026: Too Hard to Price?” (https://www.man.com/insights/Q1-2026-Hedge-Fund-Strategy-Outlook)