On any given day, millions of Europeans use Microsoft software, heat their homes with American natural gas and buy U.S. stocks. Many Americans work with German software, drink French wine and take European-made medicines.
More than $5.4 billion worth of goods and services are traded between the United States and European Union each day, backed by extensive cross-border investments that support millions of jobs.
Although President Trump walked back a threat to impose extra tariffs on several European nations to force the sale of Greenland, the turmoil was a clarifying moment for European officials.
They are looking at this enormous flow of goods, services and investments across the Atlantic as a potential source of leverage over the United States. On Thursday, leaders from the European Union say they will meet in Brussels to “coordinate on the way forward.”
“European leaders cannot act as though the last few weeks did not happen,” said Ian Bond, deputy director of the Centre for European Reform, a think tank. “This was the most serious crisis in trans-Atlantic relations in a long time, but with Trump in the White House, it will not be the last.”
Beyond tit-for-tat tariffs and other reactive measures, how can Europeans project strength to an administration that considers them weak? What would it take to deter an unpredictable partner who dismisses the global economic order and expects others to bend to his will?
“The Europeans could do bombastic things too,” said Peter Chase, a senior fellow at the German Marshall Fund in Brussels. The question is, he said, “do they gain anything from that or do they just hurt themselves?”
Selling U.S. bonds
The United States “is on an unsustainable debt trajectory,” said Richard Portes, an economics professor at the London Business School. “That is the major weakness of the United States right now, economically.”
And so, he said, Europe’s strongest economic leverage is in the financial sector.
European investors hold vast amounts of U.S. financial assets, including $2 trillion of Treasury debt. The U.S. government runs a large deficit that depends on foreign creditors to purchase these bonds. What if they stopped buying?
“If that raises then the cost of capital for the U.S. government,” said Mr. Chase of the German Marshall Fund, “then that, I think, would be something that people would have to pay attention to.”
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Scott Bessent, the Treasury secretary, has downplayed the threat of Europeans dumping Treasury bonds. “It is a completely false narrative,” he said at a news briefing this week in Davos, Switzerland, noting that the Treasury market forms the foundation of the global financial system.
The importance of U.S. Treasuries — held in huge sums by central banks, sovereign funds and asset managers around the world — means that the pain of a sell-off would be felt widely, including in Europe. But there are signs that some Europeans are questioning the creditworthiness of the United States. AkademikerPension, a Danish pension fund, said this week that it would sell its roughly $100 million in Treasuries by the end of the month.
Targeting the services trade
There are more than 450 million people living in the European Union, and American companies sell a lot of services to them. Last year, the bloc bought more services from the United States, about $300 billion, than it exported, about $200 billion, according to U.S. data.
That surplus makes the United States vulnerable because “it’s potentially also strong leverage for the E.U. to say ‘no’ to those services coming into the European market,” said Erik van der Marel, the chief economist at the European Centre for International Political Economy, a research institute.
But, he warned, “if you would boycott these kind of services into your own market, that trickles down to a reduced competitiveness of your industries.”
Digital services provided by U.S. tech companies would be the hardest to replace, he added. European substitutes could be more readily found for consultancy and financial services.
Mr. Portes of the London Business School also warned about limiting U.S. tech services, including artificial intelligence, because they are popular in Europe. But officials could exert pressure by increasing taxes on digital services.
A handful of European countries, including Britain and France, have imposed levies on the revenues of online marketplaces, advertisers and search engines. That has angered the Trump administration, which considers Europe’s stricter tech policies unfairly discriminatory against the United States.
How credible are these threats?
The true test of Europe’s leverage is its ability to enact any of these measures.
In Davos, Mr. Bessent ridiculed Europe’s often convoluted decision-making process. He said that officials would form “the dreaded European working group” rather than devise a forceful response to Mr. Trump’s demands over Greenland.
That limitation was on display on Wednesday, when the European Parliament voted to delay a long-negotiated trade deal between the European Union and four South American countries, a setback to the bloc’s push to diversify its trading relationships.
The decision was “absolutely irresponsible,” said Bernd Lange, the chair of the European Parliament’s international trade committee. “This is an own goal.”
Jordyn Holman contributed reporting from Davos, Switzerland, and Bernhard Warner from Rome.
Eshe Nelson is a Times reporter based in London, covering economics and business news.
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