Is American economy actually dependent on Europe's money?

The world knows only the half-truth, and when it comes to the US economy, all know that it is powered by domestic consumption and booms driven by Silicon Valley innovation. But one thing no one tells is the nature of the economy, which drives the economy: capital—the trade, investments, and savings that help finance American growth. And one quiet pillar is the European capital, which not only helps the American economy to grow but also helps businesses in scaling up.

With Washington and European capitals again sparring over trade and geopolitics, economists and investors are looking at a key vulnerability: what happens if Europe’s investors pull back from U.S. assets?

According to the Office of the US Trade Representative, Europe is the United States’ largest overall economic partner, spanning goods, services, and investments. As per the government’s data, US goods and services trade with the European Union stood at $1.5 trillion in 2024. Similarly, the EU pegs the overall translating relationship at €1.68 trillion in goods and services trade in 2024.

While the EU and US relations make headlines, it’s the capital and investment between both the nations that makes the backbone of the economy. And Europe is a dominant investor in the United States. And as per the data, the European firms and investors are the biggest owners of US productive assets, which include factories, subsidiaries, logistics networks, and corporate operations.

It’s not only the ownership of assets such as factories and assets; these European countries are one of the largest owners of around $8 trillion in US bonds and equities. And as the tensions in Greenland escalate, the pullback from European countries and reduced European investors’ exposure to US stocks and bonds—which means less demand for US assets—and that puts downward pressure on the dollar, which will weaken the greenback.

And as these European countries are the biggest owners of treasuries, reduced foreign appetite for treasuries can push up the yields, raising the governments’ financing costs and eventually having spillover into mortgages and corporate borrowing. Foreign investors own a significant share of U.S. Treasuries and other securities, according to U.S. Treasury data and surveys.

If the EU pulls back and a large part of European capital rotates away, U.S. stock valuations can face a higher “political risk premium,” pressuring prices. In addition, tighter financial conditions typically weigh on business investment and household spending—the classic route from markets to the real economy.

The U.S. is not “funded” by Europe in a simple one-to-one sense—America has deep domestic capital markets, and the dollar remains the central global reserve currency. But Europe is big enough that marginal shifts can move prices, especially when markets are already jittery.

That’s why some analysts argue the bigger risk in a transatlantic rupture isn’t only tariffs on goods—it’s capital markets: if Europe’s institutions reallocate even a small slice of their U.S. exposure, the effects can show up quickly in the dollar, yields, and equities.

Even if politicians talk tough, a large, coordinated “dump America” move would also hurt Europe: selling into a falling market would reduce the value of Europe’s own portfolios and can tighten financing for European banks and firms that rely on dollar markets. This is one reason many analysts see Europe’s leverage as real but constrained.

Still, the message from markets is clear: the transatlantic relationship isn’t just diplomatic; it’s financial plumbing. And when that plumbing is threatened, Wall Street notices.