Bitcoin Tumbles as Trump's Europe Tariffs Rattle Markets

European Union leaders are set to hold an emergency meeting this week to formulate a response to a new tariff threat from US President Donald Trump. The move comes after Trump announced plans to impose a 10% tariff on eight European nations starting February 1, citing their actions related to Greenland.

Emergency Summit to Forge a Unified Response

Ambassadors from EU member states met in Brussels on Sunday evening to devise a joint strategy. Following the discussion, European Council President Antonio Costa confirmed the bloc's commitment to unity, stating that member states stand in solidarity with Greenland and Denmark.

In a social media post, Costa emphasized that Trump's proposed tariffs would be "incompatible with the EU-US trade agreement." An EU official confirmed that the bloc's leaders intend to meet in person toward the end of the week.

Exploring a €93 Billion Retaliation Package

According to sources familiar with the internal discussions, the EU is considering several countermeasures. The most prominent option is the revival of a plan to impose retaliatory levies on US goods valued at €93 billion (US$108 billion).

Other potential responses being discussed include:

• The Anti-Coercion Instrument: French President Emmanuel Macron suggested on Sunday that the EU should consider using this powerful new tool. However, France has previously hesitated to deploy it after threats of retaliation from Trump.

• Withholding Trade Pact Approval: European lawmakers suggested over the weekend that they may delay the final approval of the existing EU-US trade agreement in light of the latest tariff announcement.

Last year, the EU had already approved the retaliatory tariffs on €93 billion worth of US products but suspended their implementation after both sides reached a trade pact. The current threat from the US now puts that entire agreement in jeopardy.

The European Union is pushing for diplomatic talks to resolve tariff threats from the United States concerning Greenland, choosing negotiation over immediate retaliation. This strategy aims to de-escalate a conflict that could impact up to €93 billion in US goods and disrupt transatlantic economic stability.

EU leaders are emphasizing a unified commitment to dialogue to protect peace, security, and the bloc's sovereignty. By prioritizing talks, the EU hopes to avoid a trade war and safeguard its economic interests.

EU Leaders Present a United Front

Top European officials have consistently presented a united front against the US tariff threats. Ursula von der Leyen, President of the European Commission, highlighted the shared security interests in the Arctic.

"We have consistently underlined our shared transatlantic interest in peace and security in the Arctic, including through NATO," von der Leyen stated. She noted that a pre-coordinated Danish exercise with allies was designed to strengthen Arctic security and "poses no threat to anyone."

Von der Leyen warned that tariffs would backfire. "Tariffs would undermine transatlantic relations and risk a dangerous downward spiral. Europe will remain united, coordinated and committed to upholding its sovereignty," she added.

This position is backed by other prominent leaders, including Emmanuel Macron and Antonio Costa, who argue that the proposed tariffs are incompatible with existing EU-US agreements. Their collective focus remains on protecting shared European interests.

A Strategy of Patience and Negotiation

Rather than immediately preparing retaliatory measures, the EU is exploring strategic patience. The European Parliament may consider delaying votes on trade pacts to signal its preference for a coordinated diplomatic response over escalating tensions.

While the EU has an anti-coercion instrument (ACI) under discussion, it remains cautious about the economic fallout of a trade dispute. The consensus is that negotiation is preferable. Analysts suggest that maintaining EU-US trade synergy is vital to prevent broader economic repercussions, as historical data shows peaceful negotiations often lead to more favorable outcomes for both market stability and international relations.

Precedent for Peace: Lessons from Past Disputes

The EU's current approach is guided by past successes. Just last year, a prepared tariff package against US goods was suspended following successful trade agreements with Washington. These events demonstrate the value of diplomatic resolution in averting economic conflict.

Ongoing negotiations are a constant feature of the transatlantic relationship. Recent White House actions emphasizing reciprocal trade and tariffs, along with the suspension of duty-free de minimis treatment detailed in a Federal Register notice, underscore a continued commitment to diplomatic engagement to resolve trade issues.

The Indonesian Rupiah is moving dangerously close to a record low against the US dollar, with analysts forecasting further weakness as concerns over the nation's fiscal health intensify.

Major financial institutions now predict a significant slide for the currency. MUFG Bank Ltd. projects the Rupiah could weaken to 17,000 per dollar within the first quarter, while analysts at Barclays Plc see a potential drop to 17,300 this year. The currency has already fallen for two consecutive weeks and is just 0.4% away from its all-time low set in April.

Fiscal Deficit Fears Drive Investor Concern

Investor anxiety has flared up after a January 8th announcement revealed that Indonesia's budget shortfall for last year nearly breached the legal limit. This news, coupled with weak revenue collection, has renewed pressure on the Rupiah.

"Investors are still pretty much concerned about the fiscal outlook for this year," explained Lloyd Chan, a currency strategist at MUFG. He noted that while Bank Indonesia is stepping in, "there are quite a lot of constraints on the policy side."

This month alone, the Rupiah has declined more than 1%, making it the worst-performing currency in Asia after the South Korean won.

Bank Indonesia's Intervention Efforts Face Headwinds

Bank Indonesia (BI) has been actively working to stabilize the Rupiah, most recently intervening in currency markets on Wednesday. However, analysts suggest the central bank's efforts may be constrained by a likely tolerance for a modest depreciation, potentially limiting the impact of its actions.

To anchor the currency, BI is expected to hold its policy rate steady at its upcoming meeting on Wednesday. The central bank has also deployed several other tools, including:

• Adjusting the issuance of its bills

• Intervening directly in foreign-exchange markets

• Buying government bonds in the secondary market

Medium-Term Policy Risks Weigh on Currency

Looking ahead, the fiscal picture remains a primary concern. Analysts worry that this year's deficit could also widen beyond the 3% legal limit as the government aims to increase spending despite sluggish tax revenue.

A government plan to tighten control over exporters' foreign-exchange earnings could provide a buffer for the Rupiah, according to Shier Lee Lim, a strategist at Convera Singapore.

Still, the new administration's policy direction is adding to the uncertainty. President Prabowo Subianto's pro-growth agenda may lead Bank Indonesia to lower interest rates later this year, which would likely add further downward pressure on the currency.

In a recent note, Barclays analysts including Themistoklis Fiotakis highlighted these risks. "We see greater medium-term risks that the government will attempt to embark on relatively unorthodox policies which could fuel more bearish rupiah sentiment," they wrote, referencing the 3% fiscal deficit limit.

A leading think tank has issued a stark warning to the British government: abandon its pattern of policy indecision and embrace bold reforms, or risk squandering early signs of an economic recovery.

In a new report, the Resolution Foundation argues that to build on recent momentum, the government must stop its "flip-flopping" and take decisive action on trade, housing construction, and employment. The call comes 18 months into Prime Minister Keir Starmer's term, a period the think tank characterizes as being defined by U-turns and timidity.

A Pattern of Inconsistent Policymaking

According to the Resolution Foundation, the government's record has so far failed to match its economic promises. Despite pledges from Prime Minister Starmer and finance minister Rachel Reeves to accelerate the economy, there has been no significant change in its trajectory.

The report notes that planned reforms in critical areas like welfare and taxation have either been abandoned or significantly weakened. This inconsistency, it argues, is undermining the potential for real growth.

"With signs that productivity may be turning a corner, the government must capitalise by ramping up its plans," said Greg Thwaites, research director at the Resolution Foundation.

The £2,000 Path to Economic Revival

The think tank outlines a clear path forward with significant potential benefits for households. It calculates that a combination of key reforms could boost annual household incomes by £2,000 ($2,680). These reforms include:

• Housing: Changing planning rules to help cities meet housing targets.

• Trade: Pursuing deeper regulatory alignment with the European Union.

• Employment: Implementing policies to get more young and older people into the workforce.

Such growth would also yield major fiscal benefits, generating enough tax revenue to fund a 25% increase in spending for the public health service.

Decades of Stagnation and the Brexit Burden

The call for action comes against a bleak backdrop. The UK economy has largely stagnated in the nearly two decades since the global financial crisis. The report highlights that Britain's GDP per person has fallen further behind other major European nations since the pandemic.

This long-term trend was worsened by the combined shocks of COVID-19, high energy prices, and the economic impact of Brexit, which together caused a drop in productivity growth.

Furthermore, the Resolution Foundation presents growing evidence that the economic damage from Brexit may already be close to double the 4% impact assumed by Britain's official budget forecasters.

A Glimmer of Hope in Productivity Data

Despite the challenges, the report identifies a crucial opportunity. It points to a significant 3.1% leap in productivity in the year ending in the third quarter of 2025. This figure, which adjusts for previous under-recording of employment in official data, represents the "nascent signs of improvement" that the government is being urged to seize upon.

As Japan gears up for an anticipated snap general election, a potential cut to the consumption tax is rapidly becoming a central issue, with major political parties signaling their support for the measure to ease the burden of rising living costs on households.

Currently, Japan's tax system imposes a 10% rate on most goods and services, with a reduced rate of 8% applied to food. This tax is a crucial revenue stream for funding the country's growing social welfare expenses, driven by a rapidly ageing population.

Political Momentum Builds for Tax Relief

Both the ruling coalition and the main opposition party are now publicly advocating for a temporary tax reduction, suggesting a rare point of political consensus.

Shunichi Suzuki, a key executive in the ruling Liberal Democratic Party (LDP), confirmed the party's commitment to an earlier agreement with its coalition partner, Ishin. "It's our basic stance to sincerely achieve what's written in the agreement," Suzuki stated on a television program, referring to the plan to scrap the 8% levy on food sales for two years.

This move aligns with reports from the Mainichi newspaper that Prime Minister Sanae Takaichi may pledge to temporarily eliminate the 8% food tax as a core promise when she calls for a general election next month.

The opposition is also on board. Jun Azumi, secretary-general of the main opposition Constitutional Democratic Party of Japan (CDP), announced on the same program that his party would also campaign for a temporary tax rate cut. The CDP recently agreed to form a new political entity with Komeito, solidifying this position.

Takaichi's Election Timing and Fiscal Risks

Prime Minister Takaichi is expected to announce her intention to dissolve parliament and call a snap election for February, leveraging her administration's strong approval ratings.

However, the proposed tax cut carries significant financial implications. According to government data, eliminating the 8% food sales levy would reduce government revenue by an estimated 5 trillion yen ($31.71 billion) annually.

This revenue loss would place considerable strain on Japan's already stretched national finances. Analysts are concerned that such an expansionary fiscal policy could heighten the risk of a bond sell-off as investors scrutinize the government's fiscal discipline.

($1 = 157.6900 yen)

Precious metals surged to record highs after U.S. President Donald Trump announced plans to impose tariffs on eight European nations, escalating tensions over his administration's proposal to acquire Greenland. The move has ignited fears of a major trade war, sending investors flocking to safe-haven assets like gold and silver.

Trump's Tariff Threat Sparks Market Turmoil

President Trump declared a new 10% tariff on goods from several countries, including France, Germany, and the United Kingdom. The tariffs are scheduled to take effect on February 1 and are set to increase to 25% in June.

This unexpected announcement has fueled concerns of swift retaliation from Europe, raising the prospect of a damaging trade conflict that could disrupt global markets and drive further demand for precious metals.

Europe Prepares a Counter-Offensive

In response to the U.S. threat, European leaders are preparing to hold an emergency meeting to coordinate their strategy. Officials familiar with the discussions are exploring several countermeasures, including imposing retaliatory levies on €93 billion ($108 billion) worth of American goods.

French President Emmanuel Macron is also reportedly considering activating the EU's anti-coercion instrument, the bloc's most powerful tool for trade retaliation, signaling a serious potential for escalation.

Broader Trends Fueling Precious Metals Rally

The recent tariff threat adds to a series of geopolitical and economic drivers that have propelled precious metals higher this year, extending a dramatic rally that began in 2025. The market has been reacting to aggressive U.S. foreign policy, including the seizure of Venezuela's leader and repeated threats to take control of Greenland.

Simultaneously, the Trump administration has renewed its criticism of the Federal Reserve, raising concerns about the central bank's independence. This has fueled the "debasement trade," where investors move away from currencies and government bonds, fearing that rising debt levels will erode their value.

Market Snapshot: Gold and Silver Hit New Peaks

The market reaction to the tariff news was immediate and sharp:

• Spot gold climbed 1.7% to $4,676.22 an ounce as of 7:35 a.m. in Singapore, after reaching an earlier peak of $4,690.59.

• Silver surged 3.9% to $93.6305 an ounce, hitting a high of $94.1213.

• Platinum and palladium also posted gains.

• The Bloomberg Dollar Spot Index edged down 0.1%, reflecting currency market jitters.