‘Take a deep breath': US Treasury chief tells markets ahead of Trump's Davos moment

• Major US indices suffered their biggest single-day declines in three months on Tuesday, with the S&P 500 down 2.1%, Dow down 1.8%, and Nasdaq falling 2.4%
• Trump announced 10% tariffs on eight European nations, prompting the EU to signal potential retaliatory tariffs on $109 billion of US goods
• Treasury officials fear European institutions may divest from US assets, with a Danish pension fund already announcing plans to exit US government bonds, potentially destabilizing American borrowing costs

Summary

US Treasury Secretary Scott Bessent urged markets and European leaders to "take a deep breath" and "sit back, relax" ahead of President Donald Trump's World Economic Forum address at Davos on January 21, 2026. The intervention comes amid mounting market panic over escalating trade tensions.

Key Market Movements:

• S&P 500 plunged 2.1%, Dow dropped 1.8%, Nasdaq fell 2.4% on Tuesday—the largest single-day declines in three months
• Dollar index slid to a two-week low around 98.5
• 10-year Treasury yields climbed to 4.27%; 30-year bonds approached critical 5% threshold at 4.9%

Trade War Escalation:

Trump announced 10% tariffs on eight European countries opposing his push to acquire Greenland from Denmark. The EU has signaled potential retaliatory tariffs on $109 billion of US goods.

Financial Architecture at Risk:

European institutions are beginning to divest from US assets. A Danish pension fund announced plans to exit US government bonds. While Bessent dismissed Denmark's Treasury holdings as "insignificant," the Treasury privately fears coordinated European retreat from dollar assets could destabilize US borrowing costs and global trade.

Market Implications:

The disconnect between administration messaging and market reality is widening. Foreign investors are fleeing US assets across all major classes. Bessent's plea echoes his April 2025 rhetoric during Trump's "Liberation Day" tariffs, but investors appear unconvinced this time. The situation threatens the financial architecture underpinning American borrowing and global trade if European central banks accelerate their withdrawal from dollar-denominated assets.