Europe live legal updates: Markets fall and gold and silver hit new highs!

Global financial markets rarely misread political risk when it crystallises into explicit threats. On Monday, European equities fell sharply, gold and silver surged to historic highs, and currency markets recoiled after Donald Trump announced his intention to impose sweeping tariffs on eight European states unless the United States is permitted to purchase Greenland. What initially appears to be a volatile episode of market anxiety is, in reality, the financial manifestation of a far deeper legal and geopolitical rupture: the attempted use of trade sanctions as a coercive instrument to force the transfer of sovereign territory.

The figures alone tell part of the story. France’s CAC index dropped 1.8 per cent. Germany’s DAX and Italy’s FTSE MIB declined by 1.3 per cent. London’s FTSE 100 fell 0.4 per cent. Gold rose 1.6 per cent to 4,671 dollars an ounce after touching a record 4,689 dollars. United States gold futures for February gained 1.7 per cent to 4,676 dollars. Silver climbed to an unprecedented 94.08 dollars an ounce before easing to 93.15 dollars, still up 3.6 per cent. European car manufacturers including Volkswagen, BMW and Mercedes Benz lost more than 2 per cent, while Stellantis fell almost 2 per cent. The dollar weakened by 0.3 per cent against a basket of currencies. United States markets were closed for Martin Luther King Jr Day, but American technology stocks listed in Europe also declined.

Behind this turbulence lies Trump’s declaration, published on Truth Social, that from 1 February the United States will impose a 10 per cent tariff on “any and all goods” from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland, rising to 25 per cent on 1 June unless a “complete and total purchase of Greenland” is agreed.

This threat is not merely economically destabilising. It is legally extraordinary.

Under the Charter of the United Nations, the sovereignty and territorial integrity of states are inviolable. Greenland is an autonomous territory within the Kingdom of Denmark. Its international legal status is not in dispute. The people of Greenland possess the right to self determination, a norm recognised as peremptory in international law, binding on all states without exception. No external power has any lawful entitlement to acquire the territory through pressure, inducement or economic punishment.

To demand the transfer of territory as the price for lifting trade sanctions is to revive a practice that international law was constructed to abolish after 1945.

Trade law and sovereignty law now intersect in a way that exposes the fragility of the post war legal order.

Under the World Trade Organization framework, to which the United States and all eight targeted European states are parties, tariffs must comply with the principles of non discrimination, most favoured nation treatment and proportionality. While the WTO permits certain security exceptions under Article XXI of the General Agreement on Tariffs and Trade, those exceptions are not unlimited. They are designed to address genuine national security emergencies, not to facilitate territorial acquisition.

A tariff explicitly conditioned on the sale of sovereign territory cannot plausibly be characterised as a legitimate security measure. It constitutes economic coercion aimed at altering the territorial status of another state. This places it in direct conflict with the prohibition on intervention in the domestic and external affairs of states, a rule affirmed repeatedly by the International Court of Justice, including in the Nicaragua case and subsequent jurisprudence.

In effect, the policy announced by Trump fuses trade sanctions with territorial blackmail.

Markets have grasped the gravity of this departure. As Carsten Brzeski of ING observed, businesses now face renewed uncertainty over investment and exports to the United States. Mohit Kumar of Jefferies noted that investors have grown accustomed to assuming that Trump retreats from extreme tariff threats, the so called Taco effect, meaning “Trump always chickens out”. His base case is that the February deadline will be postponed once talks begin, but he does not believe the policy itself will be reversed because Greenland “is not so easy to resolve”.

That assessment reflects a deeper truth. Tariffs used as bargaining chips in trade disputes can be negotiated away. Tariffs used to demand sovereign territory cannot be resolved within the existing diplomatic or legal architecture without one side abandoning fundamental principles.

The European Union is already preparing retaliatory measures. Such countermeasures would be lawful under WTO rules if they respond proportionately to illegal tariffs. Yet retaliation would accelerate a downward spiral of economic fragmentation, undermining the multilateral trading system that has underpinned European and global prosperity for decades.

The economic modelling reinforces the danger. ING estimates that the proposed tariffs could shave 0.2 percentage points from European GDP growth. Capital Economics forecasts a larger impact on the United Kingdom, with GDP potentially reduced by between 0.3 and 0.75 per cent, sufficient to trigger a recession in a worst case scenario. Paul Dales of Capital Economics warns that the long term political and geopolitical consequences would be greater still, possibly pushing Britain closer to the European Union on goods trade after years of post Brexit realignment.

There is an additional legal dimension that markets have only begun to price in.

If the United States were to persist with tariffs explicitly linked to the acquisition of Greenland, Denmark and the European Union would have a strong basis to initiate proceedings before the WTO dispute settlement body. They could also seek advisory proceedings at the International Court of Justice regarding the legality of economic coercion aimed at territorial transfer. While such processes are slow, their political effect would be severe, casting the United States as a state willing to subordinate law to raw power.

The strategic implications are equally profound. Matt Simpson of StoneX has noted that Trump’s willingness to deploy tariffs indicates that his Greenland threat is real, not rhetorical. Kathleen Brooks of XTB has warned that if Trump intensifies pressure at the Davos forum, the current low volatility environment will not survive January.

Gold’s surge is therefore not simply a hedge against inflation or interest rate uncertainty. It is a referendum on the stability of the legal order governing international relations.

Safe haven assets rise when law becomes unpredictable.

The irony is that the very precedent Trump cites to justify his position, the United Kingdom’s agreement to cede sovereignty over the Chagos Islands to Mauritius while leasing Diego Garcia, demonstrates the opposite of what he claims. Britain relinquished Chagos not out of weakness but because international law, through the International Court of Justice and the United Nations General Assembly, required it to end an unlawful colonial arrangement. The military base remained, but sovereignty changed hands. Strategy was preserved within law.

Trump now seeks to invert that model: to acquire sovereignty through pressure, not to relinquish unlawfully held territory through compliance.

That inversion threatens to normalise the idea that powerful states may purchase or extort territory using economic force. If such a doctrine were to take root, no state with valuable resources or strategic geography would be secure. The Arctic, already destabilised by climate change and competition over shipping routes and minerals, would become a legal vacuum governed by coercion.

Europe’s response will shape the future of that system.

If the threatened states treat the issue as a negotiable trade dispute, the principle of territorial inviolability will be weakened. If they respond as a matter of international law, insisting that sovereignty is not for sale and cannot be priced in tariff schedules, the confrontation will be sharper but the legal order may yet endure.

For now, markets have delivered their verdict.

They see in Trump’s threat not a temporary trade tactic but a structural challenge to the rules that underpin global commerce and peace. The fall in European equities, the flight into gold and silver, and the weakening dollar are not technical adjustments. They are a collective judgment that the world’s largest economy is signalling its willingness to weaponise trade to redraw borders.

That is why this episode matters far beyond Greenland.

It is about whether sovereignty remains a legal status or becomes a commodity.

It is about whether tariffs are instruments of policy or tools of territorial coercion.

And it is about whether the international system built after 1945 will continue to restrain power, or once again be reshaped by it.

Financial markets, often caricatured as amoral, have proved in this instance to be perceptive jurists. They have recognised that when trade sanctions are tied to the forced transfer of land, the risk is no longer cyclical. It is civilisational.

Gold at record highs is not a vote for metal. It is a vote against a world in which law is optional and territory is negotiable.