Gold, silver hit records and stocks fall as Trump fans trade fears
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HONG KONG: Gold and silver hit record highs on Monday (Jan 19) while most equity markets fell after United States President Donald Trump revived trade war fears by threatening several European nations with tariffs over their opposition to the US buying Greenland.
Trump has fanned already-rising geopolitical tensions this month by insisting that Washington would take control of the North Atlantic island, citing national security needs.
And on Saturday, after talks failed to resolve "fundamental disagreement" over the Danish autonomous territory, he announced he would hit eight countries with fresh levies over their refusal to submit to his demands.
He said he would impose 10 per cent tariffs on Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland from Feb 1 - rising to 25 per cent from Jun 1 - if they did not agree to the takeover.
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The announcement drew an immediate response, with a joint statement from the countries saying: "Tariff threats undermine transatlantic relations and risk a dangerous downward spiral."
The move also threatened a trade deal signed between the US and European Union last year, with German Foreign Minister Johann Wadephul telling ARD television: "I don't believe that this agreement is possible in the current situation."
Meanwhile, aides to French President Emmanuel Macron said he would ask the EU to activate a never-before-used "anti-coercion instrument" against Washington if Trump makes good on his threat.
This measure allows for curbing imports of goods and services into the EU, a market of 27 countries with a combined population of 450 million.
Bloomberg reported member states were discussing the possibility of retaliatory levies on 93 billion euros (US$108 billion) of US goods.
The prospect of a trade war between the global economic heavyweights shook markets, with safe-haven assets extending gains that had come on the back of Trump's threats against Iran last week and the US ouster of Venezuelan president Nicolas Maduro.
Gold, a key go-to in times of turmoil, hit a peak of US$4,690.59, while silver struck US$94.12.
On equity markets, Tokyo, Hong Kong, Shanghai, Sydney, Singapore and Wellington retreated, though there were gains in Seoul and Taipei.
European and US futures sank.
The dollar also retreated against its peers, with the euro, sterling and yen all higher.
"The next signpost is whether this moves from rhetoric to policy, and that is why the concrete dates matter," wrote Charu Chanana, chief investment strategist at Saxo Markets.
"On the European side, the decision path matters as much as the headline, because there is a difference between merely mentioning the anti-coercion instrument as a signal and formally pursuing it as action.
"Even if the immediate tariff threat gets negotiated down, the structural risk is that fragmentation keeps rising, with more politicised trade, more conditional supply chains and higher policy risk for companies and investors."
There was little major reaction to data showing China's economy expanded 5 per cent last year, in line with its target. However, growth in the final three months slowed sharply from the previous quarter.
Investors in Seoul and Taipei brushed off a warning from US Commerce Secretary Howard Lutnick that South Korean chipmakers and Taiwan firms not investing in the US could be hit with 100 per cent tariffs unless they boost output in the country.
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