Trade War and Economic Impact - President Trump has reignited the trade war with Europe, threatening new tariffs on eight European allies until Denmark agrees to sell Greenland, which is not for sale according to Danish leaders [2][3] - The threatened countries account for 13% of U.S. imports, making them as significant as China or Canada, and the European Union plans to retaliate with tariffs on $100 billion in U.S. exports [4][5] - Tariff hikes historically raise unemployment and lower GDP growth, contradicting Trump's claims that tariffs would bring manufacturing back to the U.S. and create jobs [5] Stock Market Valuation - The S&P 500 has a cyclically adjusted price-to-earnings (CAPE) ratio of 39.9, the highest since the dot-com crash in October 2000, indicating a high valuation [7] - Historical data shows that when the S&P 500's CAPE ratio exceeds 39, the index has an average decline of 4% over the next year and 20% over the next two years [9] - Investors may be willing to accept higher CAPE ratios due to expectations that artificial intelligence will enhance profit margins and earnings growth in the future [10]
The Stock Market Sounds an Alarm as Investors Get More Bad News About President Trump's Tariffs. History Says This Will Happen Next.
The Motley Fool·2026-01-21 08:15