UBS CEO Warns Europe on 'Risky Game' of Using US Debt as Leverage
Sergio Ermotti’s comments at Davos come amid the rising prospect of transatlantic trade disputes, highlighting risks to global market stability.
UBS Group AG Chief Executive Sergio Ermotti has issued a stark warning to European leaders against considering their vast holdings of U.S. Treasury bonds as a political weapon in potential trade negotiations, calling such a strategy a "risky game" that could backfire and destabilize financial markets.
Speaking at the World Economic Forum in Davos, Ermotti’s caution comes at a time of heightened anxiety over a potential fracturing of transatlantic relations. The discussions follow reports of renewed trade threats, including the possibility of the U.S. imposing tariffs on European goods amid a hypothetical dispute over Greenland under a potential second Trump administration. Against this backdrop, the idea of using financial leverage has entered the discourse.
"It is impossible to completely shift allocation out of the United States," Ermotti stated, emphasizing the fundamental strength of the American economy. He described any attempt by European investors to weaponize their U.S. government debt holdings as a "dangerous bet," according to remarks reported by Bloomberg.
The sheer scale of European investment in the U.S. underscores the CEO's point. As of late 2025, European nations held over $3.6 trillion in U.S. Treasury securities, according to U.S. Treasury department data. The exposure is even broader when considering all U.S. assets, with European entities owning approximately $8 trillion in U.S. bonds and equities.
A large-scale, coordinated sell-off of these assets could, in theory, drive up U.S. borrowing costs and create significant fiscal pressure. However, most analysts believe such a move would be mutually destructive. It would not only trigger a global market panic but also lead to a severe devaluation of Europe’s own reserve holdings, which are predominantly in U.S. dollars.
The debate has been fueled by the prospect of a more aggressive U.S. trade policy. Recent analysis suggests a new administration could revive an “America First” agenda, with some reports indicating the European Union is preparing retaliatory measures should Washington impose new tariffs. The Guardian has reported that the EU is readying its own set of counter-tariffs, heightening fears of a tit-for-tat trade war that could disrupt the $1 trillion-plus in annual trade between the two economic blocs.
Ermotti's intervention serves as a reminder from the financial sector that economic and political fates are deeply intertwined. While politicians may contemplate economic pressure points, the integrated nature of the global financial system means that deploying a financial "nuclear option" like dumping Treasury bonds would have unpredictable and likely catastrophic consequences for all parties involved. For now, the U.S. dollar's role as the world's primary reserve currency remains unchallenged, and as the UBS chief noted, betting against the U.S. economy remains a perilous endeavor.