European officials suspend US trade agreement amid tariff dispute over Greenland
A large vinyl decal displaying the official circular logo of the European Parliament, along with the full blue and yellow starred flag of the European Union, is affixed to the glass curtain wall of the institution’s building in Brussels, Belgium, on December 16, 2025. Michael Nguyen/NurPhoto via Getty Images
(NEW YORK) — European lawmakers on Wednesday suspended a trade agreement with the United States over tariff threats issued by President Donald Trump as part of his push to acquire Greenland.
The announcement came minutes after President Donald Trump reasserted his call for U.S. ownership of Greenland during a speech at the World Economic Forum in Davos, Switzerland.
The speech followed tariff threats issued by Trump days earlier against seven European Union countries, plus the U.K., over the issue.
European leaders, meanwhile, have pushed back on Trump’s ambitions. Greenland is a self-governing territory of the Kingdom of Denmark, a member of the EU.
Members of the Committee on International Trade (INTA) – a body within the European Parliament – hold “unshakable commitment to the sovereignty and territorial integrity of Denmark and Greenland,” European Parliament member Bernd Lange, an INTA chair on EU-US trade relations, said in a statement on Wednesday.
“By threatening the territorial integrity and sovereignty of an E.U. member state and by using tariffs as a coercive instrument, the U.S. is undermining the stability and predictability of EU-US trade relations,” Lange added.
The EU and US struck the trade agreement in July, moving to ratchet down tariffs on European goods and restore stability to the commercial relationship. At the time, European Commission President Ursula von der Leyen said the agreement “creates certainty in uncertain times.”
On Wednesday, Lange said the E.U. would pause the ratification process in response to Trump’s proposed tariffs. Under Trump’s plan, eight European nations – including Denmark, France, Germany and the United Kingdom – will be slapped with 10% tariffs beginning on Feb. 1. Those levies are set to escalate to 25% on June 1, Trump said.
In his speech on Wednesday, Trump ruled out use of the military in his push for Greenland. “We probably won’t get anything unless I decide to use excessive strength and force where we would be, frankly, unstoppable. But I won’t do that,” Trump said.
U.S. stocks slumped on Tuesday in response to the tariffs, with the Dow closing down 870 points, but recovered roughly half of those losses in a rally on Wednesday morning. In Europe, the pan-continental STOXX 600 index ticked slightly lower on Wednesday.
ABC News’ David Brennan contributed to this report.
(NEW YORK) — Blockbuster earnings from chip giant Nvidia this week appeared to rebuke concerns about an artificial-intelligence bubble, briefly ending a days-long slump in the stock market.
“It’s fair to say that Nvidia’s results have completely changed the market mood and pushed out any bubble fears for another day,” said Jim Reid, a research strategist at Deutsche Bank, in a memo to clients early Thursday morning, just hours after the earnings.
But the market went on to offer little reassurance. Shares of Nvidia fell almost 3% in the first post-earnings trading session. The major stock indexes also dropped, underscoring the importance of the technology for Wall Street and the overall economy, which have both come to rely on massive AI spending to propel growth.
Nvidia recorded $57 billion in sales over three months ending in October, the company said on Wednesday, setting a quarterly sales record and demonstrating near-bottomless demand for the semiconductors at the heart of AI.
Still, critics say such appetite for the building blocks of AI has far outpaced the technology’s end uses and financial returns. AI hasn’t delivered much profit, they argue, despite up-front costs totaling hundreds of billions of dollars spent on data centers and chips.
Proponents strongly disagree, pointing to the rapid adoption of products like ChatGPT and counseling patience as other uses of the technology take hold. To hear them tell it, AI is set to augur a tech transformation like the internet or electricity, meaning the hype will ultimately bear out even if some firms falter along the way.
“There is no question that Nvidia will make a bunch of money,” Gary Marcus, a professor emeritus of psychology and neuroscience at New York University, who specializes in AI, told ABC News. “There are many questions about where the market is headed after this initial burst of enthusiasm.”
For his part, Nvidia CEO Jensen Huang rejected AI-related worries during an earnings call on Wednesday.
“There’s been a lot of talk about an A.I. bubble,” Huang said. “From our vantage point, we see something very different.”
The economy is undergoing a technological sea change that extends beyond generative AI, Huang said, noting the rise of advanced software such as cloud computing as well as AI-driven physical products — all of which increasingly run on Nvidia chips.
“Nvidia corporation is unlike any other accelerator,” Huang added.
AI spending is expected to total $375 billion this year, jumping to about $500 billion by the end of 2026, UBS Global Wealth Management found in August. For reference, the half-trillion to be spent on AI next year would be roughly equivalent to the gross domestic product of Singapore.
The AI boom has helped propel U.S. economic growth. Such spending added a 0.5 percentage point boost to annualized U.S. GDP growth over the first half of 2025, accounting for about one-third of economic activity, Pantheon Macroeconomics said.
But analysts fearful of an AI bubble warn of what they consider immense costs, saying energy needs and chip production have saddled the balance sheets of firms developing and operating AI models. Profits may not come for years, if at all, they warn. OpenAI said it expects to begin generating substantial profits in 2030.
Speaking to reporters earlier this year, OpenAI CEO Sam Altman acknowledged frenzied investor enthusiasm but signaled confidence about the long-term outlook for the industry.
“When bubbles happen, smart people get overexcited about a kernel of truth,” Altman said. “Are we in a phase where investors as a whole are overexcited about A.I.? My opinion is yes. Is A.I. the most important thing to happen in a very long time? My opinion is also yes.”
Tech giants like Amazon and Google retain the capacity to spend without taking on sizable debt, but smaller players require loans, risking credit defaults if the technology fails to deliver on the up-front costs, Marcus said. The potential unpaid loans could strain banks and put pressure on the wider financial system, he added.
“A big question is how much the banks have been propping this up: What will the blast radius be?” Marcus said.
Proponents of AI say such worries are overblown. They point to the popularity of products like AI chatbot ChatGPT, which boasts about 800 million weekly users. Millions of additional users avail themselves of xAI’s Grok, Google’s Gemini and Meta’s MetaAI.
Last year, Apple unveiled AI-fueled tools for its iPhones, Mac and iPad. Some firms are developing a new wave of AI-equipped robots to perform tasks in people’s homes and in workplaces like logistics and warehouses.
“This is the fastest adoption of any technology by consumers by far,” Lynn Wu, a professor of operations, decisions and information at the University of Pennsylvania, told ABC News. “This is a general purpose technology that will be adopted everywhere.”
The profitability of the technology will be made apparent over time as consumers and businesses identify its best uses, Wu added.
“When a general purpose technology — like electricity or the internet — is being adopted, firms and people don’t know how to use it,” Wu said. “We haven’t envisioned how to use this paradigm yet.”
Still, Wu cautioned, an AI bubble likely exists, though it isn’t dangerous. Wu compared the current state of the industry to the internet era before the dot-com bubble, when a host of firms went belly up but the technology reoriented the economy and established corporate giants.
“If you ask me flat out — yes or no — are we in a bubble? The answer is yes,” Wu said. “But the bubble isn’t necessarily a bad bubble.”
(NEW YORK) — Stocks ticked downward in midday trading on Thursday, wiping out a rally earlier in the day driven by blockbuster earnings from chip giant Nvidia and a stronger-than-expected jobs report.
The Dow Jones Industrial Average fell about 60 points, or 0.1%, while the S&P 500 declined 0.2%. The tech-heavy Nasdaq fell 0.3%.
Those returns marked a reversal from highs earlier in the day. Previously, the Dow had risen 1.2%, while the S&P 500 had jumped 1.8% and the Nasdaq had spiked 2.5%.
Shares of Nvidia, the $4.7 trillion juggernaut behind many of the chips fueling artificial-intelligence products, ticked down 0.1% in midday trading after having surged upward earlier in the day.
A stock market selloff over recent days underscored the uncertainty looming over the economy as some investors warned of an AI bubble. The earnings blowout from Nvidia late Wednesday appeared to rebuke such concerns, however, temporarily reviving enthusiasm for an AI trade that has propelled much of the market gains this year.
The S&P 500 has soared 15% in 2025, while the Dow has climbed 10%. The Nasdaq has increased 19% this year.
Investors also appeared to draw optimism from a jobs report on Thursday morning, which showed far more hiring than economists’ expected. The fresh data defied a hiring slowdown that took hold over the summer.
The U.S. added 119,000 jobs in September, according to data from the U.S. Bureau of Labor Statistics. That figure marked an acceleration from the previous month, and it exceeded an average of nearly 100,000 jobs added per month over the first half of 2025.
The report included a downward revision for the month of August, however, slashing performance from 22,000 jobs gained that month to 4,000 jobs lost.
An earnings release from Walmart on Thursday morning also exceeded revenue expectations, offering some reassurance about the health of consumer spending.
Inflation has picked up in recent months while hiring has ratcheted down, posing a risk of an economic double-whammy known as “stagflation.”
Those economic conditions have put the Federal Reserve in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment.
In recent months, concern has tilted toward strain in the labor market, prompting the central bank to reduce interest rates a quarter of a percentage point at each of its last two meetings.
On Thursday morning, markets appeared to digest the news as favorable toward a potential interest rate cut at the Fed’s meeting next month. The odds of a quarter-point rate cut ticked up from 33% on Wednesday afternoon to 43% on Thursday morning, according to the CME FedWatch Tool, a measure of market sentiment.
(NEW YORK) — New York City Mayor-elect Zohran Mamdani, a democratic socialist who says he wants to hike taxes on the rich, set off alarm among some critics about a potential exodus of wealthy people bent on keeping their money out of government coffers.
As the warning goes, a tax increase at the top could drive away affluent New Yorkers and undercut revenue meant to fund proposals like universal child care, free city buses and publicly owned grocery stores.
John Catsimatidis, the billionaire owner of grocery chain Gristedes, told the Free Press in June he may “consider closing our supermarkets and selling the business” in the event of a Mamdani victory. Neil Blumenthal, the co-founder and co-C.E.O of eyewear company Warby Parker, said, “I will never move from New York, but there’s a lot of other people that will and are leaving New York.”
Even Democratic New York Gov. Kathy Hochul, who ultimately endorsed Mamdani, warned in an interview in June about the possible departure of the wealthy set. “I don’t want to lose any more people to Palm Beach,” Hochul told local outlet PIX 11, underscoring her opposition to a tax increase.
Studies show a race for the exits of this type is highly unlikely, experts at Northwestern University, as well as research organizations the EU Tax Observatory and the Tax Foundation, told ABC News.
Similar tax increases in states like California have typically pushed out a small number of wealthy people, the experts said, but the vast majority stay put for reasons that hold true across income brackets: They like where they live, and want to remain close to friends, family and professional networks.
“There is tax-induced mobility. It’s not non-existent but it’s very small,” Quentin Parinello, policy director at the Northwestern University as well as research organizations the EU Tax Observatory and the Tax Foundation, told ABC News.
“In New York and other big metropolises, people want to be somewhere they can go to the theater, they can have business opportunities, they can hire talent,” Parinello added.
Mamdani says he will put forward a 2 percentage point tax increase for residents making more than $1 million, which would raise the tax rate for high earners in New York City from roughly 3.9% to 5.9%.
The mayor-elect has also proposed hiking the corporate tax rate from 7.5% to 11.5%, which would put New York in a tie with New Jersey for the highest state corporate tax rate nationwide.
“These things together raise about $9 billion, which more than pays for our economic agenda,” Mamdani told ABC’s “Good Morning America” this month.
When asked whether he is concerned the taxes could drive job creators out of New York, Mamdani said: “What I’ve heard from a number of business leaders is that the affordability crisis is also affecting their ability to attract and retain talent. The city’s inability to provide child care means that businesses often have to provide stipends for that child care.”
Both tax measures would require state legislation bearing Hochul’s signature.
Studies from researchers at Stanford University, the Treasury Department and the non-partisan Fiscal Policy Institute show minimal departures among the rich in response to tax increases.
Researchers at Stanford University and the Treasury Department in 2016 examined tax records belonging to all million-dollar earners in the U.S. over a 13-year period, finding “tax flight is occurring but only at the margins of statistical and socioeconomic significance.”
In 2023, the Fiscal Policy Institute examined movement among high earners in the aftermath of a New York state income tax hike two years earlier.
“There is no statistically significant evidence of tax migration in New York,” the study found.
“Movement of rich people on the basis of tax differentials is relatively small,” Jeffrey Winters, a professor of equality development and globalization studies at Northwestern University who studies high earners, told ABC News. “It’s very common for them to threaten to move. The risk is grossly overstated.”
Jared Walczak, vice president of state projects at the non-partisan Tax Foundation, voiced opposition to Mamdani’s proposed tax hike, saying the policy risks a gradual erosion in the high-earner tax base and revenue losses that would accumulate over time.
“The city won’t empty out if taxes rise, but on the margin you expect some people to move,” Walczak told ABC News.
“That hurts the city and the state because these individuals are already paying a lot of taxes and creating a lot of jobs,” Walczak added.
Winters, of Northwestern University, said the focus on wealthy residents risks overlooking the cost-of-living challenges that force low- and middle-income New Yorkers to move elsewhere.
“We are worried about the outflow of the very wealthiest people in major cities like New York when in fact the biggest outflow of people is among those who can’t afford even the basics of staying there,” Winters said.
