Stock market responses to conditional tariff threats: Evidence from the Greenland tariffs

This paper examines how equity markets respond to targeted and conditional tariff threats. I study the announcement on January 17, 2026, in which the U.S. administration threatened escalating tariffs on imports from eight NATO countries unless a geopolitical demand — the purchase of Greenland — was met. The policy was highly unusual in that tariffs were explicitly tied to a non-trade objective and selectively applied to political and military allies of the United States. Using an event-study design and daily stock market indices, I find that abnormal returns (AR) in targeted countries decline by approximately 1.5 percentage points on the first trading day relative to non-targeted countries, resulting in cumulative abnormal returns (CAR) of about −1.6 percentage points over a three-day window. By focusing on a narrowly targeted, politically conditioned tariff announcement, this paper contributes to the literature on trade policy and asset prices by identifying the market valuation of such threats.