European stocks jump as Trump backs off tariffs threat, DAX up 1.2%
On January 22, 2026, European stocks climbed sharply after a major shift in U.S. trade policy lifted investor anxiety. Traders were breathing a sigh of relief when U.S. President Donald Trump announced he would not go ahead with threatened tariffs on several European countries tied to his controversial push over Greenland.
The reversal eased fears of a broader trade clash between Washington and Brussels. The result? Key European indexes, including Germany’s DAX, jumped higher as buyers stepped back into the market.
This news changed the mood on global stock floors. Earlier threats had pulled markets down and stirred worry about slower economic growth. Now that the tariff threat has eased, investors are looking at markets again with more confidence. This positive move in stocks shows how much financial markets react not just to corporate results, but also to big political decisions.
Let’s discuss what happened, why it matters, and how traders and companies may react next.
The Trump Pivot: From Tariff Shock to European Market Relief
European markets were under stress early this week. Traders feared a trade war after U.S. President Donald Trump threatened tariffs on eight European countries tied to Greenland. That threat shook stocks worldwide. It pushed safe-haven assets higher and equities lower.
Then on January 22, 2026, things changed. At the World Economic Forum in Davos, Switzerland, Trump said he would not impose the planned tariffs. He also ruled out using military force to acquire Greenland. Instead, he said he and NATO Secretary General Mark Rutte had agreed on a “framework of a future deal” on Greenland and Arctic security.
This decision shifted the mood. Investors saw fewer risks of a trade war. That brought relief to markets that were jittery. Stocks quickly climbed as traders digested the news and reduced their fear premium.
European Markets Reaction: What Moved and Why?
European shares rallied on January 22, 2026. Germany’s DAX index rose about 1.2%, while France’s CAC 40 climbed nearly 1.3% and the FTSE 100 gained around 0.7% in morning trade. The broader pan-European STOXX 600 index also jumped about 1%.
Buyers stepped in, especially in cyclical sectors such as automobiles and telecoms. These industries are sensitive to trade costs and global demand. Autos rallied as investors bet that cross-border sales might be safer without new levies.
However, not all areas rose. European defence stocks fell after the tariff threat was dropped. Shares in companies like Rheinmetall and Thales slipped about 1-2% as markets weighed slower government defence spending once tensions eased.
Investors were also watching corporate updates for clues on demand and profits. Positive company news reinforced the sense that markets were stabilizing after a turbulent start to the week.
Market Psychology: From Panic to Optimism
For two days earlier in the week, fear drove markets lower. On January 20 and 21, threats of new tariffs triggered sell-offs in stocks and bonds. That pushed investors into safer assets like gold and government debt.
Psychology plays a big role in markets. Traders hate uncertainty. When the tariff threat was real, markets priced in higher risks and costs for European exporters. But once Trump backed down, that fear eased. Investors returned to riskier assets like stocks.
This quick shift shows how linked markets are to political decisions. Even without long-term trade policy clarity, a single announcement can change sentiment rapidly.
Broader Global Impact: Correlated Rallies in U.S. & Asia
The relief rally was not limited to Europe. In the United States, stock indexes also climbed on January 22, 2026. The Dow Jones Industrial Average, S&P 500, and Nasdaq each rose about 1.2% after Trump’s tariff reversal.
Asia reacted too. Major Asian markets, including Japan’s Nikkei 225 and South Korea’s Kospi, posted strong gains as traders felt more confident about global trade stability. This spread of positive moves reflects how financial markets are interconnected.
Global bond markets also shifted. Yields eased slightly as risk aversion dropped, and gold prices dipped as demand for safe havens softened.
Trump Trade Policy in Context: What This Means for Europe
This episode shows how quickly geopolitics can influence markets. A few days ago, the threat of tariffs led EU legislators to block key trade agreements in protest. The European Parliament paused a major U.S.-EU trade deal, calling the threatened tariffs “blackmail.”
Europe’s economic outlook often depends on stable trade relations. When threats loom, companies delay investment and costs rise. The latest tariff reversal eased those pressures, but analysts warn that uncertainty remains. Markets still price in the possibility of future political flare-ups.
Investor Takeaways for U.S.-Europe Talk and What to Watch Next
Investors now watch several key signals. First is how U.S.-Europe talks progress on Greenland and broader trade issues. Any setback could reignite volatility. Second is corporate earnings data for Europe’s largest companies. Strong results could reinforce confidence.
Currency markets also matter. A stronger euro could help exporters if trade fears fade. Conversely, weakness in the dollar could lift commodity prices and affect global demand. Keep an eye on these moves for clues about future stock trends.
Finally, central bank decisions, particularly from the European Central Bank and the U.S. Federal Reserve, will shape interest rate expectations. Those decisions can influence markets as much as trade policy.
Wrap Up
On January 22, 2026, European stocks jumped after the U.S. President Trump reversed his threatened tariff action, lifting major indexes and easing global risk sentiment. Markets responded to clearer policy signals and reduced fears of a trade war. While uncertainty still exists, the swift rally shows how political decisions can quickly change investor behavior. Watching evolving trade talks, corporate earnings, and central bank moves will be key for market direction in the weeks ahead.
Frequently Asked Questions (FAQs)
European stocks rose on January 22, 2026 because U.S. President Trump dropped his plan to impose new tariffs on Europe. This eased fears of a trade conflict and boosted investor confidence.
The DAX rose about 1.2% on January 22, 2026 after Trump backed off tariff threats. Traders saw less risk for exporters, so they bought more stocks.
U.S. tariffs make exporting goods to the U.S. cost more. This can slow sales and hurt European companies. When tariffs are dropped, markets often recover.
Disclaimer
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.
