Will Europe really weaponize its vast holdings of U.S. assets? Financial markets are debating extreme countermeasures.

As Europe weighs how best to respond to the latest threat from US President Trump regarding Greenland sovereignty, investors have begun discussing an extreme potential countermeasure. European countries hold trillions of dollars in US bonds and stocks, some of which are held by public sector funds. This has sparked speculation in the market that Europe may retaliate by selling such assets in response to Trump's renewal of the trade war. Given the US reliance on foreign capital, this move could potentially raise borrowing costs and drag down stock prices. However, easier said than done. Most of these assets are held by privately owned funds not directly controlled by the government, and even if such action could be taken, it might also harm European investors. Therefore, most strategists believe the likelihood of decision makers ultimately taking this step is low, especially considering that Europe has been reluctant to engage in direct confrontation with Trump since his return to the White House a year ago.