European defence shares fell Thursday after President Donald Trump announced he would not impose new tariffs on European nations. He cited progress toward a framework deal concerning Greenland, effectively removing the tariff threat scheduled for February 1st. Major manufacturers like Rheinmetall, Leonardo, Thales, and SAAB all dropped between 1.2% and 2.75%.

Trump's decision followed what he called "very productive" talks with NATO Secretary-General Mark Rutte. The potential deal extends beyond tariffs to include Greenland's natural resources and the Golden Dome missile defence system. This softer stance on Greenland contrasts with earlier threats of force and represents a significant pullback in transatlantic trade tensions.

Markets had been on edge over Trump's aggressive tariff proposals, which aimed to pressure European allies over Greenland. The removal of this immediate threat likely eases short-term uncertainty for the sector. Investors will now watch for concrete details on the proposed U.S.-NATO framework and how it might reshape future defence procurement and resource rights.

The episode underscores how geopolitical negotiations directly influence defence equity valuations. With NATO spending already a key driver for these companies, any deal that solidifies U.S. alliance commitments could provide a more stable outlook. However, the sector remains sensitive to the administration's fluctuating trade and security policies.