Jorge Costa Oliveira
Donald Trump’s continued insistence that the United States should annex Greenland triggered a strong condemnation from European governments. Trump responded by threatening to impose additional tariffs on European countries. As a result, the European Parliament refused to ratify the trade agreement signed between the EU and the U.S. at the end of last year.
Clearly, U.S. leadership will continue to pursue a confrontational stance toward Europe.
French President Emmanuel Macron and the leader of the liberal Renew group in the European Parliament have proposed invoking the European Anti-Coercion Instrument (ACI).
Without prejudice to the use of this instrument – and/or other measures – what would be truly effective in response to the threats of America’s leader would be the use of U.S. public debt held by European countries.
U.S. public debt has reached $38 trillion. By the end of the current fiscal year, it is expected to reach $41 trillion.
In 2025, the U.S. Treasury had to issue $9 trillion in new Treasury bonds (UST) to finance the budget deficit and refinance maturing debt.
When Trump began threatening several countries with hyperbolic tariffs, one of the targets – Japan (which held approximately $1.1 trillion in U.S. federal debt securities) – quietly sold $72 billion in U.S. Treasuries on the market. The yield on 10-year Treasuries then rose from 3.9% to 4.3%. Months later, China (which held around $760 billion in U.S. Treasuries), at the height of Trump’s imposition of absurdly high tariffs, sold $50 billion worth of these securities. The yield on 10-year Treasuries subsequently rose from 4.3% to 4.5%. Brazil also sold approximately $60 billion in U.S. Treasuries between October 2024 and October 2025.
Rising Treasury yields increase the cost of servicing U.S. federal debt. They also make it more difficult to reduce the benchmark interest rates set by the Federal Reserve. Trump has been pressuring the Fed to cut these benchmark rates to help revive economic activity in the United States.
Without the astronomical investments made by technology companies – especially in artificial intelligence – the U.S. economy would have stagnated, or grown by just 0.1%, in 2025. The Fed has resisted pressure to cut rates because it considers inflation has not yet reduced sufficiently. However, without such cuts, the Republican Party is likely to lose the midterm elections at the end of this year.
European countries should do what Japan, China, and Brazil have already done – sell U.S. Treasuries held by European states ($3.6 trillion, about 40% of U.S. debt held by foreign governments). Given the unpredictability of U.S. politics and the increased risks involved, the largest pension funds in Sweden ($8 billion) and the Netherlands ($11 billion) have already begun to do so. Any such sales by European countries should be carried out in a coordinated manner, both among themselves and in concert with other U.S. Treasury holders (Canada, Japan, China, South Korea, India, and Brazil).
This would ensure that America’s “dear leader” is made aware of his country’s vulnerabilities – and understands that wars are not fought solely with military equipment.
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