European stock markets fell on Monday and gold and silver prices hit record highs after Donald Trump threatened to impose additional tariffs on eight European countries in an increasingly aggressive attempt to claim Greenland.

Germany’s DAX, France’s CAC and Italy’s FTSE MIB were all down more than 1%, as was the pan-European STOXX 600. In the UK, the FTSE 100 fell 0.4% to 10,194.

Gold rose 1.6% to $4,671 (£3,481) an ounce , after reaching an all-time high of $4,689, as investors turned to safe-haven assets. US gold futures for February gained 1.7% to $4,676.

Silver climbed to a record high of $94.08 an ounce, before easing to $93.15, up 3.6%.

European carmakers were among the hardest hit, with Volkswagen, BMW and Mercedes-Benz falling between 2.5% and 4%, while the Peugeot owner, Stellantis, dropped 2%.

“For businesses, the developments over the weekend mean another period of uncertainty around investments in and exports to the US,” said ING’s global head of macro analysis, Carsten Brzeski.

US markets were closed on Monday for Martin Luther King Jr Day, but US tech stocks listed in Europe also declined. Shares in the Google owner, Alphabet, listed in Frankfurt, fell 2.2%, while Nvidia and Microsoft were down 2.9% and 1.6%, respectively.

The dollar was down 0.3% against a basket of currencies.

On Saturday, Trump threatened to impose a 25% tariff on Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland until the US was allowed to buy Greenland, marking an extraordinary escalation in the president’s campaign to claim the autonomous Danish territory.

In a lengthy post on Saturday on Truth Social, Trump said he would impose a 10% tariff beginning on 1 February “on any and all goods sent to the United States of America”.

Trump said the tariff would be “payable until such time as a Deal is reached for the Complete and Total purchase of Greenland”, rising to 25% on 1 June.

Mohit Kumar, chief economist at Jefferies, said markets had become accustomed to factoring in the notion that “Trump always chickens out” – or Taco – when it came to tariffs.

Kumar said: “Markets have become used to Taco from Trump, with a number of randomly imposed tariffs scaled back after negotiations. Our base case is that the 1 February deadline will get postponed as diplomatic talks will start between the EU and the US. However, we do not think that Trump will reverse his policy of these additional tariffs, as the matter of Greenland is not so easy to resolve.”

Brzeski said businesses operating within the EU could end up exploiting a tariff loophole. “Of course, the EU is a single trade bloc with no tariff barriers within. This means that options for tariff evasion from the six countries mentioned by Trump are plentiful,” he said.

“Take Belgium, for example, which is set to keep the 15% tariff but is positioned between the Netherlands and France, both of which will see tariffs rise to 25% as of 1 February. As a result, Belgian ports could become busier as they present a potential route for tariff evasion. This would ultimately make the tariff less effective than the previously announced levies,” Brzeski added.

ING estimates that additional tariffs would probably shave 0.2 percentage points off European GDP growth. The UK could be harder hit, with Capital Economics forecasting that new tariffs could reduce UK GDP by 0.3-0.75% and trigger a recession in a worse-case scenario.

“The long-term political and geopolitical consequences would be much greater,” said the Capital Economics chief UK economist, Paul Dales. “One could be that the UK is nudged closer to the EU, at least when it comes to trade in goods.”

EU ambassadors are now preparing retaliatory measures should Trump follow through on the tariff threat.

Matt Simpson, a senior analyst at the global financial services firm StoneX, said: “With Trump throwing tariffs into the mix, it is clear that his threat to Greenland is real. Geopolitical tensions have given the gold bulls yet another reason to push it to new highs.”

Kathleen Brooks, a research director at the broker XTB, said: “This was a big week for markets, and it hinges on Donald Trump’s tone at Davos. If he increases pressure on Europe to let him have control of Greenland, then we do not think that the benign market environment and low volatility – which is still well below the 12-month average – can persist as we move through January.”