"That's after Trump announced new U.S. tariffs on NATO countries that sent troops to Greenland amid his plans to take over the semi-autonomous Danish territory. At face value, a 10% tariff rising to 25% would have minimal economic consequences, Capital Economics chief economist Neil Shearing said in a note Sunday, estimating they would reduce GDP in the targeted NATO economies by 0.1-0.3 percentage points and add 0.1-0.2 points to U.S. inflation. "The political ramifications would be far greater than the economic ones," he warned, with any attempt by the U.S. to seize Greenland by force or coercion potentially leading to irreparable harm to NATO."
"Holding those bonds helps balance America's massive external deficits, and Europe is the world's biggest lender to the U.S. For example, offsetting the U.S. trade imbalance requires heavy inflows of capital from abroad. Meanwhile, the Treasury Department must also finance budget gaps by issuing more debt, often to foreign investors. "European countries own $8 trillion of US bonds and equities, almost twice as much as the rest of the world combined," Saravelos pointed out."
EU officials are considering financial retaliation in response to new U.S. tariffs tied to Greenland, with France urging use of an anti-coercion instrument that can target investment and finance. Economists estimate the tariffs would have limited direct economic impact but could produce large political fallout and strain NATO ties. Europe holds substantial amounts of U.S. assets, helping finance America’s external deficits and budget shortfalls. European ownership of roughly $8 trillion in U.S. bonds and equities gives the EU potential leverage to retaliate through capital and financial measures if geoeconomic stability among Western allies is disrupted.
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