EU’s $8 trillion stake in U.S. assets highlights deep financial interdependence

The European Union is currently holding $8 trillion in U.S. bonds and equities, making it the largest foreign lender to the United States and nearly double the holdings of the rest of the world combined. According to Deutsche Bank’s global head of FX research George Saravelos, this sizeable position gives the EU a unique stake in U.S. financial markets and it could influence investor behaviour amid worsening trade disputes.

The scale of the EU’s holdings reflects the long-standing appeal of U.S. assets, especially Treasuries, which remain among the most liquid and trusted securities globally. European pension funds, insurers and asset managers have increasingly relied on dollar-denominated investments to diversify portfolios and manage risk, particularly in times of market volatility..

Hence, recent tariff threats from Washington have heightened the risk of a broader economic clash between the U.S. and the EU. While some argue that the EU’s holdings could serve as leverage in such disputes, analysts caution that the reality is more complex. Most of the U.S. assets held by Europeans are owned by private institutions rather than governments, making coordinated action difficult. A large-scale sell-off would likely inflict significant losses on EU portfolios as U.S. bond prices fell and yields surged, limiting the practicality of using the holdings as a direct bargaining tool.

Nonetheless, the concept of “dollar rebalancing” has gained traction in financial markets. Investors are increasingly watching whether geopolitical risk could prompt EU institutions to reduce dollar exposure and shift into euro-denominated assets. If such a trend were to materialise, it could support the euro while putting upward pressure on U.S. borrowing costs. Even without a coordinated policy move, the threat of such a shift may be enough to influence market pricing and investor sentiment.

The broader implication is that the EU’s financial dependence on U.S. markets may drive renewed interest in strengthening the euro’s role as a global reserve currency and deepening European capital markets. For now, the EU’s $8 trillion stake in U.S. assets remains a powerful reminder of how intertwined the two economies are and how quickly that relationship can become a source of tension when politics and trade collide.

Benedetta Zimone