As Europe considers how best to respond to U.S. President Donald Trump’s latest threats over Greenland’s sovereignty, there’s one extreme potential counter measure that’s fueling debate among investors.
European countries hold trillions of dollars of U.S. bonds and stocks, some of which sit with public sector funds. That’s spurring speculation they could sell such assets in response to Trump’s renewed tariff war, potentially driving borrowing costs up and equities down given U.S. reliance on foreign capital.
But that’s easier said than done. The bulk of these assets are held by private funds outside the control of governments, and in any case such a move would likely hurt European investors too. Most strategists therefore believe there’s a low chance policymakers would ultimately go so far, given their broad reluctance to stand up to Trump since his return to power a year ago.