US President Donald Trump relaunched a major trade offensive against Europe on Wednesday, threatening to hit the EU with damaging auto tariffs if Europeans failed to agree a long-delayed trade deal.
With observers warning that global harmony on trade was crucial to the health of the world economy, Trump warned Europe that the US would protect its interests, on the second day of his stay at the Davos economic forum.
His interventions took the focus off climate change which had dominated the first day of event, where Trump lashed out at the "prophets of doom" who say that the world is in crisis over global warming.
"The European Union is tougher to deal with than anybody. They've taken advantage of our country for many years." Trump told Fox Business News on the sidelines of the World Economic Forum in Davos.
"Ultimately, it will be very easy because if we can't make a deal, we'll have to put 25 percent tariffs on their cars," he added.
Trump said that his attention would now to turn to Europe, after he sealed a trade truce with China that cooled several years of a bitter trade war that destabilised the world economy.
"I wanted to wait till I finished China, to be honest with you. I always like to be very transparent. I wanted to wait till I finished China. I didn't want to go with China and Europe at the same time."
- 'Arbitrarily putting taxes' -
Trumps comments followed a warning by US Treasury Secretary Steven Mnuchin that Washington would proceed with long threatened auto tariffs if Europeans go through with a digital tax that mainly affects US firms.
"If people want to arbitrarily put taxes on our digital companies we will consider putting taxes arbitrarily on car companies," Mnuchin told a panel at the four-day meeting at the elite Swiss ski resort.
But France and Britain said they would push through with their digital tax plans as well as continue multilateral talks at the OECD to come up with new tax rules for Google, Facebook and other giants.
"We plan to go ahead with our digital services tax in April," said British finance minister Sajid Javid, emphasising that the legislation would "fall away" if there was an international solution.
"It is a tax that is deliberately designed as a temporary tax," he said. "This year could be the year of change. There is no agreement yet but I think we should all focus on that and reach a deal this year"
Mnuchin emphasised the US was still involved in the OECD solution, but insisted that a digital tax was "discriminatory in nature."
- 'Something very dramatic' -
EU-US trade relations deteriorated soon after Trump came to power three years ago and declared a war against the yawning trade deficit with Europe.
The earliest transatlantic skirmish came when Trump imposed tariffs on steel and aluminium imports, notably from the EU, which responded by taxing iconic US products, including denim jeans and motorcycles.
Trump then threatened duties on European cars, which is of particular concern to Germany, but has so far backed down under the pressure of US lawmakers.
The US and EU agreed to pursue a trade deal in July 2017 as a tentative truce, but negotiations have stalled over farming.
Trump offered an olive branch to the Europeans meanwhile, giving his backing to a reform of the World Trade Organization, the arbitrator of global commerce that he says is unfair on Washington.
"I've had a dispute running with them for quite a while because our country hasn't been treated fairly," Trump said, speaking alongside WTO chief Roberto Azevedo.
"We're going to do something that I think will be very dramatic," Trump told reporters.
The EU would like to see trade conflicts resolved within the rules of the Geneva-based WTO, but instead the US has effectively shut it down by refusing to fill key jobs.
Washington had also moved this month to ease tensions on other trade fronts.
The US Senate this month voted to approve a new trade agreement linking the United States, Canada and Mexico. The United States and China also signed a long-awaited, if partial, deal to ease trade frictions.