(The opinions expressed here are those of the author, a columnist for Reuters)
By Jamie McGeever
ORLANDO, Florida, Jan 22 (Reuters) - Talk of the “Sell America” trade has returned, and even if it quiets after news of U.S. President Donald Trump’s potential Greenland deal, it’s fair to assume it’s not going away.
We’ve been here before. Last year, “de-dollarization” was the buzzword, as Trump’s tariff-based trade war sparked fears that investors would slash their exposure to U.S. assets.
That didn’t happen. Official U.S. Treasury figures show that foreigners bought a net $1.27 trillion of U.S. securities in the first 11 months of last year, spearheaded by a flood of money into Wall Street from private-sector investors gripped by the artificial intelligence frenzy.
November feels like ages ago, though. The blizzard of controversial policy steps from Trump since then – which have effectively upended the U.S.-European alliance and rules-based world order of the last 80 years – has revived talk of shorting Uncle Sam.
And the world has a lot of U.S. assets to sell - around $27.6 trillion on a net basis, as per the last official count. That’s the difference between the $68.9 trillion of U.S. assets owned by overseas investors and the $41.3 trillion of foreign assets owned by Americans.
In economic jargon, this is America’s net international investment position (NIIP). It is the largest on record, both nominally and as a share of GDP at over 90%.
In trading parlance, this means the world is net “long the USA” to the tune of $27.6 trillion. It’s a lopsided position, particularly the equity portion, and is increasingly being seen as a “Sword of Damocles” hanging over U.S. markets.
With Trump’s bellicose policy agenda causing global consternation, especially in European capitals, the question now is whether the world is willing to maintain that stretched position, or start to reallocate.
<h3>MUTUALLY ASSURED FINANCIAL DESTRUCTION</h3>
The answer won’t reveal itself quickly. Some Scandinavian pension funds have indicated they will reduce their holdings of U.S. bonds, but as Treasury Secretary Scott Bessent somewhat disparagingly noted this week, they are too small to move the needle.
This debate is reviving talk of “mutually assured financial destruction,” a concept previously associated with fears that China might dump its Treasuries to push up U.S. yields and hurt Washington. It is now being applied to Europe.
But the China example is instructive. Beijing has gradually reduced its exposure to Treasuries in recent years without triggering the feared spike in yields, largely thanks to strong demand from European countries like Britain, Belgium and Ireland filling the void.
Deutsche Bank’s George Saravelos estimates that European nations own $8 trillion of U.S. stocks and bonds, almost twice as much as the rest of the world combined.
Europe may no longer consider the U.S. a reliable partner, but forging new trade links, supply-chain networks, and strategic partnerships takes time. A quick decoupling from the U.S. would be both hard to achieve and highly risky.
For starters, there are no other markets as large or liquid as those in the U.S. – and shunning American equities would also mean betting against many of the world’s most valuable, innovative companies.
“There’s no way to restructure the global economy without a lot of wealth destruction in the process,” says Sarah Bauerle Danzman, senior fellow at the Atlantic Council. “Everyone knows that, which is why Trump has been able to go so far on his threats.”
<h3>REMEMBER THE DEFICIT?</h3>
A mass exodus is unlikely, but it only requires the pace of inflows to slow enough to depress the value of U.S. assets and erode the “American exceptionalism” narrative.
And the U.S. needs to plug its massive current account deficit. To be sure, that gap has narrowed sharply over the last two quarters, and Trump’s protectionist trade policies could ensure it continues to shrink.
But net capital inflows of $1 trillion or more a year from overseas are still required. Inflows last year were substantial, but can they be sustained?
Of the net $1.27 trillion of U.S. securities bought by foreigners in the first 11 months of last year, $663 billion was in stocks, Treasury figures show. That’s more than triple the $205 billion bought in the same period in 2024.
“The world is incredibly long the U.S.,” says Brad Setser, senior fellow at the Council on Foreign Relations. “It’s not so much that people need to be convinced to hold onto their U.S. assets, but to buy more.”
Given the geopolitical whirlwind emanating from Washington, convincing the world to stick with the U.S. right now may be a tough sell. With the global regime shifting, the financial balance underlying it may start to change as well.
(The opinions expressed here are those of the author, a columnist for Reuters)
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U.S. portfolio investment liabilities - Citi
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/4pSojPo?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="771" height="537" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/4pSojPo"/>
Who owns U.S. securities?
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/45KaY4D?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="773" height="584" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/45KaY4D"/>
U.S. net international investment position breakdown - Brad Setser
<img src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/4qzfET9?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1020" height="660" original-src="https://imageproxy.pbkrs.com/https://tmsnrt.rs/4qzfET9"/>
US foreign assets and liabilities
<img src="https://imageproxy.pbkrs.com/https://reut.rs/4pLfkQ1?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" width="1420" height="918" original-src="https://imageproxy.pbkrs.com/https://reut.rs/4pLfkQ1"/>
(By Jamie McGeever; Editing by Marguerita Choy)

The article discusses the ongoing debate about the world’s $27 trillion net long position in U.S. assets amid concerns over U.S. policies under President Trump. Despite previous fears of 'de-dollarization', foreign investments in U.S. securities remained strong. However, recent controversial policies have led to speculation about reallocating investments away from the U.S. While some European pension funds are reducing U.S. bond holdings, a mass exodus is unlikely due to the lack of alternative markets. The sustainability of capital inflows into the U.S. remains uncertain, especially given the geopolitical climate.

- The article discusses the ongoing debate surrounding the "Sell America" trade amidst U.S. President Trump’s controversial policies and their impact on investment dynamics.  
- It highlights that while foreign ownership of U.S. assets stands at $27.6 trillion, the risk of reallocating investments due to geopolitical tensions persists.  
- Despite these concerns, a mass exodus from U.S. securities is deemed unlikely, as the unique liquidity of U.S. markets makes swift decoupling challenging and potentially harmful.

Reuters

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ROI-Will the world cut its $27 trillion 'long USA' position?: McGeever