Trump threatens Europe with fresh tariffs in Davos, deepening a rift with longtime U.S. allies

DAVOS, Switzerland – President Donald Trump renewed his threat to put hefty tariffs on European cars Tuesday at the World Economic Forum, promising hardball tactics if trade negotiations do not go his way.

Just days after Trump scored wins with China, Mexico and Canada, the move highlighted how Trump is quickly pivoting to make Europe the next front in his protectionist trade war.

As part of this push Tuesday, Treasury Secretary Steven Mnuchin warned that Italy and Britain could face U.S. tariffs if they pursue taxes on large technology companies such as Facebook and Alphabet’s Google. French President Emmanuel Macron agreed in recent days to delay a similar tax to avoid Trump’s tariffs.

The threatened tariffs were evidence of the growing rift between the United States and Europe, on clear display as leaders from the two continents appeared to be talking from different scripts. Trump insisted on discussing a new trade deal, while European leaders kept emphasizing action on climate change and cooperation.

“We’re going to talk about a big trade deal,” Trump said at the start of a one-on-one meeting with European Commission President Ursula von der Leyen. “We’ve been talking about it for a while, and hopefully we can get something done.”

After 70 years of being largely hand in hand in promoting democracy and capitalism around the world, the United States and Europe are now at odds over trade, climate change, taxation, privacy, Iran and defense funding. And Trump continues to try to use tariffs to pressure European leaders to meet his demands.

“Europe and America are moving slightly apart from each other,” said Rachel Kyte, dean of the Fletcher School at Tufts University and the former World Bank special envoy for climate change. “It’s not just the trade war but a fundamentally different approach to privacy and the role of business and society.”

Leaning on the same tactics he used against China, Trump threatened a 25 percent tax on European cars if Germany, France and the United Kingdom did not formally announce that Iran had broken a 2015 nuclear deal. The longtime U.S. allies ultimately did just that last week.

The U.S. president used the same threat to get France to back down on its proposed digital tax. Trump said he would impose tariffs of up to 100 percent on roughly $2.4 billion worth of imported French wine and other goods unless France stopped its plans to put a 3 percent tax on large tech companies such as Google and Facebook with global revenue topping 750 million euros, or around $830 million. Most of the companies subject to that tax are American.

“If anybody is going to tax these companies, it’s going to be U.S.,” Trump said Tuesday shortly after confirming that Macron had agreed to delay the digital tax this year in exchange for Trump holding off on the tariffs.

In Europe, world financial leaders expressed hope that Trump had come to Davos to announce a reduction in trade tensions not just with China but with Europe as well. Macron tweeted Tuesday morning that he and Trump had a “great discussion” in which they agreed to work together “to avoid tariff escalation.”

But Trump made it clear that his new focus is a wide-ranging trade deal with Europe and that he had not taken tariffs entirely off the table.

“They know that I’m going to put tariffs on them if they don’t make a deal that’s a fair deal,” Trump told the Wall Street Journal shortly before his meeting with von der Leyen.

Many business and political leaders in Europe are unsure whether the tensions are just a result of Trump’s “America First” rhetoric or there is truly a deeper divide forming.

“It’s difficult to say if this is a new norm or just a political period,” said André Calantzopoulos, a Greek businessman who is chief executive of Philip Morris International.

While there is widespread hope among the elite gathered in Davos that the United States and Europe will keep a close relationship, business leaders say they are increasingly having to develop different strategies for the two regions, something that would have been unthinkable only a few years ago.

“It’s almost as though there are three different models: There’s the Asia model, the Europe model and the Americas model,” said Kelly Grier, U.S. chair at Ernst & Young, a global consulting firm. “That is without a doubt adding complexity to business in general.”

Grier pointed to diverging regulations on data privacy in Europe, China, the United States and now California as an example of a costly and cumbersome legal environment that businesses now have to navigate.

For months, European officials have tried to stay under Trump’s radar, hoping he was distracted with the China talks. Several European leaders, including Macron, have invited Trump to high-profile ceremonies, in part to keep trade discussions going and avoid tariffs.

“Up until now, Europe has managed to keep its head low when it comes to Trump’s trade ire,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “But with Trump calling a truce with China, he may be looking to pick one last trade fight before the November election – and Europe is in his sights.”

Still, among many European business leaders in Davos, there is disbelief that Trump would go forward with extensive tariffs on Europe.

“Often the bark seems to be worse than the bite,” said Mark Haefele, chief investment officer at UBS bank. “President Trump, as he gets closer to the election, may have an ‘America First’ policy in name, but he’s very focused on the overall economic success of the United States.”

They point out that the United States and Europe have a lot more in common than the United States and China. Wages in much of Western Europe are the same, or even higher, than they are in the United States, making the economies more of an even playing field.

Still, the Trump administration’s warnings of new European Union tariffs are following a familiar pattern. Much to European leaders’ chagrin, Trump has backed out of the Iran nuclear deal and the Paris climate accord as key parts of his “America First” strategy. In Davos, Trump never directly mentioned climate change, the issue at the top of most European leaders’ agendas.

“The world is in a state of emergency, and the window to act is closing fast,” Klaus Schwab, founder of the World Economic Forum, said in remarks shortly before Trump took the stage. The European Union has its own Green Deal in the works to become carbon neutral by 2050, including new regulations and massive government investment.

In his formal address at Davos, Trump dismissed such concerns as overly alarmist. He stressed that countries should be free to make their own decisions.

“We must reject the perennial prophets of doom and their predictions of the apocalypse,” Trump said. “These alarmists always demand the same thing – absolute power to dominate, transform and control every aspect of our lives.”

The divergence in U.S. and European priorities was evident again when Trump met one-on-one for the first time with the new European Commission president.

Von der Leyen told Trump of the long history of good relations between the two continents. She said there were “issues” to discuss but never used the word “trade.”

“We never should forget that we have a long history of a common foundation,” she said, adding, “The American people and the European people are good friends, and this is what we’re going to build on.”

Even while nerves are high about what Trump will do in this next phase of his trade war, there was relief that Trump at least came to Europe and was willing to talk. In addition to his speech, he met and dined with several European officials and business leaders.

“We are all here. Everybody is here,” said Kristalina Georgieva, who is the new head of the International Monetary Fund and grew up in Bulgaria during the Cold War. “We may be shouting with each other, but we are talking with each other.”