Think of it like a long-term relationship where one partner controls the joint bank account. Europe doesn’t need to drain it to make a point. Just slowing down the deposits sends a very clear message.
A new analysis published on the CEPR VoxEU platform by economists Paola Subacchi and Paul van den Noord lays out the mechanics of Europe’s financial position relative to the United States. The core finding: Europe holds approximately $12.6 trillion in US assets overall, with European NATO countries alone owning about $2.8 trillion in US Treasuries. That figure climbs to $3.3 trillion when Canada is included.
The real leverage, the researchers argue, isn’t in the dramatic scenario of dumping those holdings on the open market. It’s in something quieter and harder to defend against: simply buying less going forward.
The power of showing up less
Here’s the thing about Treasury markets. The US government needs to constantly issue new debt. That means it needs constant buyers. When a major buyer starts showing less enthusiasm at auction, the government has to offer higher yields to attract other bidders. Higher yields mean higher borrowing costs for Uncle Sam.
