‘This is sell America’ — U.S. dollar, Treasury prices tumble and gold spikes as globe flees U.S. assets

The “sell America” trade is in full swing Tuesday morning after President Donald Trump and European leaders escalated tensions over Greenland.

U.S. bond prices tumbled, sending yields spiking. The U.S. Dollar Index, which weighs the greenback against a basket of six foreign currencies, fell nearly 1%. The euro jumped 0.6% against the dollar.

“This is ‘sell America’ again within a much broader global risk off,” Krishna Guha, head of global policy and central banking strategy at Evercore ISI, wrote in a note to clients.

Precious metals gold and silver marched to fresh highs. Gold, which has long been viewed as a safe-haven investment during periods of geopolitical turmoil, was on track for its biggest one-day gain since 2020.

U.S. stocks tumbled as investors mitigated exposure to American assets. The Dow Jones Industrial Average slid more than 800 points, while the S&P 500 and Nasdaq Composite each dropped more than 2%. The Cboe Volatility Index (VIX), known Wall Street’s “fear gauge,” spiked to a highs last seen in November.

The latest flare-up in so-called sell America positioning follows Trump’s threats to impose 10% tariffs on eight European countries as part of his push to take over Greenland. Representatives from the 27-nation European Union gathered for an emergency meeting in response to Trump’s tariff call, which he said would start Feb. 1 and then rise to 25% on June 1.

Greenland has repeatedly rejected Trump’s request to purchase the arctic island, with Prime Minister Jens-Frederik Nielsen saying Monday that it would “not be pressured” and “stand firm on dialogue, on respect and on international law.” European officials are reportedly considering using a salvo of counter-tariffs and other punitive economic measures against the U.S. in retaliation.

The “sell America” trade suggests that global investors will place higher risk premiums on U.S. investments amid fears that the U.S. is no longer a reliable trading partner. Following Trump’s latest threats, some investors worry that European countries could dump U.S. assets in a show of power.

“On the other side of trade, deficits, and trade wars, there are capital and capital wars,” Bridgewater Associates founder Ray Dalio told CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland. “If you take the conflicts, you can’t ignore the possibility of the capital wars. In other words, maybe there’s not the same inclination to buy … U.S. debt and so on.”

The drop in the U.S. Dollar Index was the largest since Trump’s so-called Liberation Day rollout of sharply higher tariffs in April, many of which were subsequently pared back.

International markets continued to slide Tuesday after starting to retreat on Monday, when U.S. markets were closed for the Martin Luther King Jr. Day holiday. Trump’s latest threats to tariff French wine and other imported goods rattled investors who feared the U.S. would no longer act as an unwavering commercial ally of Europe. The pan-European Stoxx 600 extended its recent decline, following Asian markets into the red.

Evercore ISI’s Guha said the dollar falling and the euro rising suggests that global investors are “looking to reduce or hedge their exposure to a volatile and unreliable” United States. Impacts on the dollar and other U.S. assets could be severe and long-term, if Trump does not walk back his plans — a trade known as “TACO,” or “Trump Always Chickens Out,” that was coined last spring — or find a compromise, Guha said.

“What remains to be determined is the magnitude and duration of these dynamics,” Guha said.

More broadly, investors may be looking for ways to diversify away from U.S. stocks at a time when indexes are near all-time highs and American equities take up a majority of the world’s total market capitalization, according to Russ Mould, investment director at AJ Bell.

“Markets may already be pricing in full the concept of American exceptionalism, at least barring an epic, crack-up economic boom,” Mould said. “It may therefore not take too much to persuade investors to hedge their bets and diversify.”

— CNBC’s Jeff Cox, Yun Li and Chloe Taylor contributed to this report.