On Monday, Yahoo Finance, a prominent U.S. financial news portal, reported that Europe holds approximately 8 trillion USD in U.S. bonds and stocks. If the European Union (EU) were to liquidate these assets, it could potentially cause significant instability in the U.S.
European nations collectively own 8 trillion USD in U.S. bonds and stocks, which is roughly double the amount held by all other countries combined.
This gives Europe an overwhelming stake in U.S. assets compared to other nations in the security alliance.
However, if tensions between the U.S. and Europe continue to escalate, leading to a European sell-off of American assets, the U.S. economy could face severe repercussions.
The impact could be particularly pronounced if Europe decides to offload a substantial portion of U.S. assets before the midterm elections. Such a move could deal a significant blow to the Republican Party under Donald Trump’s leadership. Should the Republicans suffer losses in the midterms, Trump may quickly find himself in a lame-duck position.
George Saravelos, head of foreign exchange research at Deutsche Bank, a global investment powerhouse, commented that Europe’s 8 trillion USD holdings in U.S. assets effectively give it leverage over America’s Achilles’ heel. A European sell-off of these assets could trigger a massive shock to the U.S. economy, potentially leading to a decline in the USD’s value.
Saravelos further noted that in an environment where the stability of alliances is under threat, Europeans have little incentive to maintain U.S. asset holdings for the sake of stabilizing the USD’s value.