Ermotti Warns of Risky Bet as Europe Flirts With Debt Selloff
(Bloomberg) — Europeans tempted to weaponize their holdings of US government debt amid the standoff with President Trump over Greenland are making a “dangerous bet” that risks backfiring.
That was the view of UBS Chief Executive Officer Sergio Ermotti, who runs one of the world’s largest wealth and asset managers, after a day when transatlantic tensions ramped up and markets sold off on the prospect of a deeper US-Europe trade war and a fracturing of NATO.
“Diversifying away from America is impossible,” Ermotti said in a Bloomberg Television interview at the World Economic Forum in Davos, Switzerland, on Tuesday. “The US is the strongest economy in the world.”
The Swiss executive’s warning came hours after a signal that Europeans would broaden their resistance to Trump’s threats of higher tariffs for those countries opposing his stated intention to achieve control of Greenland, a semi-autonomous part of the Kingdom of Denmark. Danish pension fund AkademikerPension, which has about $100 million in US Treasuries, said it’s planning to exit the debt by the end of the month.
As US stock markets opened on Tuesday, investors exercising the “Sell America” trade sent Treasuries and the dollar lower. The S&P 500 dropped as much as 1.6%, erasing all of this year’s gains, and the VIX Index, a measure of expected stock-market swings, hit the highest since November. Gold — a go-to haven — rose to a record of over $4,700 an ounce.
While the Danish pension fund move is marginal in terms of scale, it highlights attention on a potential new theater of action in the rapidly unraveling transatlantic relationship.
European countries hold trillions of dollars of US bonds and stocks, some of which sit with public sector funds. That’s spurring speculation they could sell such assets in response to Trump’s renewed tariff war, potentially driving borrowing costs up and equities down given US reliance on foreign capital.
Ermotti’s comments underline the dilemma faced by many European financial firms — as they are active on both sides of the Atlantic. UBS straddles the US and European markets, with almost $7 trillion in global assets. The firm is seeking a full banking license in the US in a bid to gain market share in the world’s biggest wealth management market.
Yet outrage over the Trump administration’s stance has prompted relative unity among European leaders, and emboldened voices who’d take further financial and economic steps to resist what French President Emmanuel Macron called “vassalization and blood politics.”
“If I were an adviser to some European governments, I would say you almost need to create a little bit of market volatility because Donald Trump cares about that a lot, probably more than other politicians,” said Michael Krautzberger, the chief investment officer for public markets at the Allianz SE subsidiary, which manages €580 billion ($680 billion) in assets.
The planned divestment by AkademikerPension marks an important symbolic step in the current political context as institutional investors rethink what constitutes a safe haven. The specter of money managers in Europe weaponizing capital was raised earlier in a note by Deutsche Bank AG as a way for the bloc to retaliate in the face of Trump’s continued threats.
Given the US government’s debt profile, there are reasons to think the risks in US debt are in any case too big to ignore, Anders Schelde, chief investment officer at AkademikerPension, told Bloomberg on Tuesday.
“There’s a strong realization across Europe that we need to be able to stand on our own feet,” Schelde said.
Krautzberger suggested Europe should “at least threaten access for US companies to European markets,” among other potential counter-measures. That refers to the European Union’s so-called anti-coercion instrument, which if triggered could impose curbs on US investments, goods and services across the bloc.
Yet Ermotti’s warning also implies that European economies are hardly able to decouple from the US given its strong economic growth and innovation — or replace the US Treasury market as the core risk-free asset in financial markets. The largest foreign holder of US Treasury debt, China, held back from any rapid sales of the assets during two trade confrontations with successive Trump administrations — largely on the basis that there’s no other place for such large capital flows to go, and dumping them risks being an act of self harm.
Data last week showed that overseas holdings of US Treasuries advanced in November to the highest level on record, with increases in Norwegian, UK, and Canadian stockpiles.
–With assistance from Ezra Fieser.
©2026 Bloomberg L.P.
