EU Weighs 'Financial Nuclear Option' Against Trump's Greenland Tariffs

Trade hostilities between Washington and Brussels have entered a dangerous new phase. Following President Trump's imposition of tariffs on NATO members resisting his bid to acquire Greenland, the European Union is reportedly moving beyond traditional retaliatory levies to weigh the weaponization of financial flow.

The $8 Trillion Leverage

While France presses for the activation of the EU's “Anti-Coercion Instrument,” Deutsche Bank's Global Head of FX Research, George Saravelos, argues the real threat lies in capital markets. Europe nations hold approximately $8 trillion in US assets—roughly double the holdings of the rest of the world combined.

“Europe effectively finances the US deficit,” Saravelos noted. With the US Net International Investment Position (NIIP) at record negative levels, American fiscal stability is heavily dependent on foreign mostly European demand for Treasuries.

Markets Brace for 'Sell-USA'

• Holdings: $8 trillion in US assets held by European entities.
• Impact Analysis: 10-25% direct tariff impact vs. 0.1-0.3% GDP loss.
• Indicator: US Treasury yields and USD liquidity at risk of repricing.

The threat is not merely theoretical. A Danish pension fund has already begun reducing USD exposure. If this shifts to a coordinated policy, the implications for USD liquidity and US Treasury yields would be profound.

Analysts warn that while the direct economic impact of a 10-25% tariff might only shave 0.1-0.3% off GDP, the breakdown of the Trans-Atlantic financial architecture would dwarf these figures. A “Sell-USA” dynamic could force a repricing of the dollars safe-haven status, particularly as the US Treasury prepares for heavy debt issuance to fund its widening deficit.