Overview of Can Europe sell America?
This episode of The Indicator from Planet Money (NPR) examines whether Europe could — or would — use its financial muscle to punish the United States by selling U.S. assets. The conversation was prompted by tensions between the U.S. and Europe (including the Greenland episode) and a Deutsche Bank note suggesting Europeans could weaponize their holdings of U.S. Treasury bonds. Planet Money interviews Robin Wigglesworth (editor of FT Alphaville) to explain what tools Europe actually has, how big its exposure to U.S. assets is, and how realistic a coordinated sell-off would be.
Key points and takeaways
- The EU’s “anti-coercion mechanism” (nicknamed the “bazooka”) would allow Europe to retaliate beyond tariffs — including targeted measures against companies — but using it risks collateral damage to Europeans and invites retaliation.
- Europe (private investors across the continent) holds roughly $3 trillion in U.S. Treasuries — more than mainland China’s official holdings — making Europe a major foreign creditor of the U.S.
- There are two distinct ways Europe could “sell America”:
- Market-driven retreat: European investors slow or stop buying U.S. assets (less dramatic, but meaningful over time).
- Coordinated legal/regulatory forced divestment: an extreme, politically and logistically difficult option that would likely hurt Europeans as much as Americans.
- Robin Wigglesworth thinks the dramatic, coordinated divestment scenario is unlikely — it’s complex, costly to European investors, and risks mutual economic pain (“mutually assured destruction”).
- Isolated moves are happening (e.g., a Danish pension sold about $100 million in U.S. Treasuries), but those appear small and not necessarily politically driven.
How Europe could exert financial pressure
- Anti-coercion mechanism (EU legal tool): could target companies and services (e.g., ban a U.S. tech company from operating in Europe). Powerful in theory, but risky to deploy.
- Treasury holdings: Europe is a large foreign holder of U.S. Treasuries (~$3T). Slowing purchases could raise U.S. borrowing costs; mass selling could spike yields and disrupt markets — but would also damage holders’ portfolios.
- Broader divestment: reducing investments in U.S. stocks, bonds, and direct investment. This can be gradual market shifts or imposed via laws/regs (the latter being technically and politically fraught).
Limitations and likelihood
- Ownership is largely private: U.S. assets owned by EU pensions, insurers, banks, and private investors — not directly by national treasuries — making forced sales hard to effect without sweeping legislation.
- Self-harm: Dumping large quantities of U.S. assets would lower their value and inflict significant losses on European investors; retaliation and market instability are likely.
- Political will: Escalation risks unpredictable retaliation from the U.S. and global financial fallout. For now, Europe appears more likely to adjust behavior selectively rather than launch a financial “nuclear” option.
- Conclusion from the guest: The dramatic scenarios pushed by one Deutsche Bank analyst are overblown; coordinated, continent-wide weaponization of U.S. holdings is implausible in the near term.
Notable quotes and soundbites
- Emmanuel Macron (paraphrase from Davos): “Europe has very strong tools now… the anti-coercion mechanism is a powerful instrument.”
- Robin Wigglesworth: “Europe is an old wealthy continent… Around three trillion or so is in the treasury market.”
- On forced divestment: “It would be cutting off your nose to spite your face” / “Mutually assured destruction.”
Signals to watch (for investors and policymakers)
- Coordinated EU legislation explicitly targeting U.S. assets or mandating divestment.
- Large, sustained reductions in European net purchases of U.S. Treasuries.
- Major public moves by large European institutional investors (pension funds, insurers) citing political motives.
- Sudden spikes in U.S. Treasury yields or rapid FX moves tied to geopolitical rhetoric.
Bottom line
Europe has tools to pressure the U.S. financially, and it holds substantial U.S. assets. But practical, legal, and self-interest constraints make a coordinated, continent-wide sell-off unlikely. More plausible outcomes are targeted measures against companies and a slower, market-driven reallocation of European capital away from the U.S. — developments worth monitoring but not an immediate financial Armageddon.