U.S. President Donald Trump’s willingness to use economic pressure against allies is again raising the possibility that targeted nations could join forces and push back with a coordinated “

sell America

” strategy involving U.S. Treasuries and, potentially, broader U.S. investments.

American stock markets sold off briefly earlier this week after Trump said he planned to impose stiff tariffs against numerous EU nations and suggested military confrontation was possible in his pursuit of Greenland.

With Prime Minister Mark Carney using his global platform at Davos Tuesday to call for “intermediate powers” such as Canada to join forces in an era where financial infrastructure has become a tool of coercion, the idea of dumping U.S. holdings to retaliate against pressure from the United States has gained traction.

“In principle, ’selling America’ would be incredibly powerful because of the U.S. current account deficit,” said Mark Manger, director of the global economic policy lab at the University of Toronto’s Munk School. “If the ‘middle powers’ really did that, U.S. interest rates would blow up and the dollar would fall, almost surely tipping the U.S. into a massive recession.”

A Denmark pension official said this week that the fund planned to

sell its $100 million worth of U.S. Treasuries

. While “poor government finances” in the United States were blamed, the timing suggested the Danish pension was reacting to more than America’s long-recognized debt problem, as Trump continued to threaten to take over Greenland, a largely autonomous part of the Kingdom of Denmark.

On Wednesday, U.S. Treasury Secretary Scott Bessent brushed off the pension fund’s plan, calling the planned Treasuries dump “irrelevant” and telling reporters in Davos that all of Denmark holds less than $10 billion of the $30.8 trillion U.S. Treasury market.

While Denmark’s U.S. debt holdings alone aren’t huge, European Union countries together hold about $8 trillion worth, while Japan, China and Canada hold more than $2 trillion combined.

However, there would be major caveats to pursuing a co-coordinated strategy of unwinding those holdings.

For one thing, U.S. Treasuries have become an integral part of managing financial institutions across the G7 and they serve as a traditionally stabilizing force for governments to hedge against credit risks in their own markets. Many pension funds, too,

have leaned on the bonds

to match their long-term liabilities in the form of inflation-protected guarantees to pensioners.

None of this would be easy to replace.

“Governments demand it to hold as foreign reserves and financial institutions hold it for liquidity purposes. It has been a good hedge; its price increases in turbulent times,” said Juan Carlos Hatchondo Couture, an economics professor at the University of Western Ontario whose research focuses on international finance and sovereign debt.

“They could threaten with (sell America), but it would require a high degree of coordination and may backfire.”

The potential harm is greater for Canada than for Europe: If U.S. yields rise because people are selling U.S. bonds, Canadian bonds tend to follow suit, said Manger.

“Even our fixed-rate mortgages get more expensive. Europe is less vulnerable … because their interest rates are determined by the Eurozone,” he said.

There is also a practical problem for those contemplating “sell America” as a strategy, and it’s a big one:

finding an alternative investment

.

“The only viable alternative would be eurozone bonds. But, that would have all kinds of effects on the eurozone – interest rates would probably decline too much,” Manger said. “I also don’t think … that there’s even enough public debt, counting all the middle powers, to absorb that much capital.”

Another impediment is that the central banks and many institutional investors that hold a large chunk of U.S. debt operate at arm’s-length from government policymakers.

“Those Treasuries are held by private investors or banks or pension funds, and you can’t just order them to sell because they have a fiduciary duty to their shareholders or pension contributors, not to the government,” Manger said.

Bringing those players aboard would be crucial for Canada. If only the Bank of Canada decided to dump U.S. debt, it would account for only about $68 billion in U.S. dollar denominated foreign reserves — and not all of them are Treasury securities, said Hatchondo Couture.

“That is not a meaningful amount to have an impact on the market of around $30 trillion (U.S.),” he said, adding that the majority of Canada’s US$470 billion in U.S. debt is, therefore, in the private sector.

“It may be a challenge to try to induce financial institutions to unwind their holdings of U.S. debt securities without disrupting financial services in Canada.”

There are other potential consequences, including contagion, said Patrick Augustin, a professor of finance at McGill University whose research interests include sovereign credit risk.

“While it is theoretically possible that allies could ‘vote with their feet,’ such a strategy would be difficult to justify in practice as it could directly reduce the value of the substantial USD (dollar) reserves and could pose risks to financial stability, including spillovers to banks and pension funds,’ he said.

Moreover, widespread selling of U.S. treasuries could have a global repricing effect that bleeds from bonds into other asset classes and geographies.

‘(If) you have sellers of Treasuries, that potentially can have

selloffs in stocks afterwards

and that will then impact, potentially, other trades,” Augustin said. “There’s certainly going to be ripple effects everywhere in that situation.”

Still, even without the coordination of a full sell America strategy being unleashed, volatility in the bond market appears to have an effect on Trump.

In April, his Liberation Day tariffs were delayed for months after U.S. Treasuries fell unexpectedly and yields were pushed up sharply. In pulling back, he specifically mentioned the “very tricky” bond market.

And on Wednesday, the day after yields were pushed up again by activity in Japan’s bond market and geopolitical tensions, Trump said in a social media post that he would not be imposing fresh tariffs on Europe as planned Feb. 1. Without providing details, he said in a social media post that he had agreed to a “framework” with NATO’s secretary general Mark Rutte for a future deal “with respect to Greenland and, in fact, the entire Arctic Region.”

Sell America discussions are likely to continue, despite the most recent cooling of trade and geopolitical rhetoric, and they don’t just contemplate lightening up on Treasuries.

“The same applies to the stock market, for sure,” said Manger, noting that institutional investors in Canada have broad holdings in a private U.S. assets as well.

Canada’s largest pension funds, which invest globally, have spent much of the past year considering whether factors including the second Trump presidency have made investments in public and private assets in the United States riskier.

Even without much in the way of new investments there, the percentage of the

Canada Pension Plan’s portfolio

allocated to the United States grew in fiscal 2025 as stock markets dominated by big tech players soared and the U.S. dollar rose.

Kenneth Kroner, a former senior managing director at BlackRock Inc, said reducing dependence on U.S. assets makes sense for global institutional investors and would align with the diversification strategy pursued by Canada’s largest funds.

“There’s a case to be made, and that case fits perfectly with Carney’s middle powers alliances,” he said. “The two are different sides of the same coin.”

He added that a “sell America” strategy, if adopted, should not be confused with a forecast that U.S. assets will underperform.

“This is all about risk management, not return maximization,” said Kroner, who sat on AIMCo’s board of directors for nearly eight years.

“Smart investors will take a lower return if it comes with substantially less risk.”

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• Email: bshecter@nationalpost.com