UBS Warns on US Debt as Tensions Rise
Investment bank UBS is warning that recent U.S. military action against Iran and trade volatility are worsening America's fiscal health. The bank highlights that the "wobble" from increased defense spending and tariff uncertainty is exacerbating the nation's already precarious debt outlook.
The U.S. national debt currently exceeds $38.86 trillion, which translates to over $116,000 for every citizen. This figure is growing by approximately $4.5 billion each day. The nation's debt-to-GDP ratio now stands at 136%. Projections from the Congressional Budget Office indicate that if current trends continue, the debt held by the public will reach 120% of GDP by 2036, a level higher than any point in the nation's history. For fiscal year 2026, the defense appropriations bill provides a total discretionary allocation of $839.2 billion for the Department of Defense. This includes significant investments in aircraft, naval ships, and modernization of the nuclear triad. Recent tariff policies have generated substantial revenue, with an estimated $194.8 billion in additional customs revenue in 2025. However, these tariffs also contribute to price increases for consumers, with imported goods prices rising in the past year. The Congressional Budget Office projects a federal budget deficit of $1.9 trillion for fiscal year 2026. A significant driver of future deficits is the rising cost of interest payments on the national debt, which are projected to total over $1 trillion in 2026 alone. Legislation passed in 2025 is expected to add an estimated $3.4 trillion to the budget deficit over the next decade. This has intensified concerns among economists about the sustainability of the nation's fiscal path. The current effective average tariff rate is 13.7%. While these tariffs are projected to raise hundreds of billions in revenue over the next decade, they are also expected to have a persistent negative impact on the overall size of the U.S. economy.
