Trump threatens big tariffs on car imports from EU at Davos if no trade deal struck

U.S. President Donald Trump on Wednesday threatened to impose high tariffs on imports of cars from the European Union if the bloc doesn't agree to a trade deal.

Trump has previously made threats to place duties on European automobile imports, with the intent of receiving better terms in the U.S.-Europe trade relationship. Trump has delayed imposing the tariffs a number of times.

"I met with the new head of the European Commission, who's terrific. And I had a great talk. But I said, 'look, if we don't get something, I'm going to have to take action' and the action will be very high tariffs on their cars and on other things that come into our country," Trump told CNBC's Joe Kernen in an interview from the World Economic Forum (WEF) in Davos, Switzerland.

Former German Defence Minister Ursula von der Leyen succeeded Jean-Claude Juncker at the end of 2019 as the EU's top official, becoming the first woman to hold the post.

The U.S. has also threatened duties of up to 100 per cent on French goods, from champagne to handbags, because of a digital services tax that Washington says harms U.S. tech companies.

Trump told CNBC that the European Union had to make a deal on trade. "They have no choice," Trump said.

In a separate interview in Davos with Fox Business News, Trump said the tariffs on EU cars could amount to 25 per cent.

"Ultimately it will be very easy because if we can't make a deal, we'll have to put 25 per cent tariffs on their cars," Trump told Fox Business' Maria Bartiromo in an interview.

The U.S. struck a Phase 1 trade deal with China in January, soothing some of the worries which have hampered the world economy in recent times.

The Phase 1 agreement eases some sanctions on China while Beijing has agreed to step up its purchases of U.S. farm products and other goods. However, many issues remain unresolved and tariffs imposed by Trump over the past couple of years remain in place.

U.K. trade deal

Asked if a trade pact with the United Kingdom could come next, Trump told CNBC he was ready to make a deal with Prime Minister Boris Johnson.

"Boris and I are friends, and he wants to make a deal, and that's OK with me," he said.

The U.K. is due to leave the EU at the end of January, and Johnson has stated that one of the main advantages of being outside the bloc would be the ability for the nation to negotiate its own trade deals, including with the U.S.

"We're starting. We've already started negotiating" with the U.K., Trump said.

Trump also said he expects to be able to make a trade deal with Europe, but that negotiating an agreement is in many ways tougher than the trade pact he brokered with China.

"We're going to make a deal I suspect, otherwise we'll have to do something else," Trump told a news conference at the WEF.

Also on Wednesday, Trump vowed dramatic action with the World Trade Organization (WTO), saying the group's director general would visit Washington as soon as next week, but giving no other details.

"We're going to do something that I think will be very dramatic," Trump told reporters.

The WTO lost its ability to intervene in trade disputes after the United States effectively paralyzed it when two of three members exited, leaving the trade arbiter unable to issue rulings.

WTO director-general Roberto Azevedo, speaking alongside Trump at the news conference, said the WTO needed serious change and that the multilateral system was not functioning properly

"If the WTO is to deliver and perform its role in today's global economy, it has to be updated," he said. "We are committed to effect those changes."

Azevedo said he would discuss what needs to be changed with Trump as soon as possible, as well as with leaders from other WTO member nations.

U.S. Treasury Secretary Steven Mnuchin downplayed talk that trade discussions with China will be wrapped up by this November's U.S. presidential election.

Speaking at a panel at the WEF, Mnuchin said there is "no deadline" to the so-called Phase 2 discussions.

He said there was "no question" that tariffs and the threat of tariffs have been a "big incentive" in the trade agreements.

He hinted that a grand trade agreement with China may not come in one go and that there may be a series of smaller agreements.

Fight over tech tax

Meanwhile, Mnuchin and his U.K. counterpart Sajid Javid clashed over taxation on Wednesday in a brewing battle over how Europe taxes the world's biggest technology firms.

Javid said the U.K. would press ahead with a digital service tax in April even as Mnuchin, sitting feet away on the same stage, said such a move could generate "arbitrary" retaliation.

Several European nations are considering taxes on search engines, social media platforms and online marketplaces to compensate for lost revenues, drawing the ire of the U.S. which claims that such a tax unfairly targets US firms.

"International tax issues are very complicated and take a long time to look at. If people want to just arbitrarily put taxes on our digital companies, we'll consider arbitrarily putting taxes on car companies," Mnuchin told a panel.

France, which considered a similar tax, agreed this week to suspend down payments for this year's digital tax after Washington threatened retaliation with tariffs on French wine.

Javid said the U.K. would not back down.

"We plan to go ahead with our digital services tax in April," Javid said. "It's a proportionate tax and it's deliberately designed as a temporary tax, so it will fall away once there is an international solution."

Seemingly trying to ease the tension, Mnuchin added that talks over the issue would be done in private, not on live television, and the key discussion is likely to be between Trump and Johnson.

Mnuchin also said that the U.S. was ready to strike a new trade agreement with the U.K. after it leaves the European Union.

"We're very much looking forward to a new trade agreement with the U.K. That's a big priority of ours for this year."

Mnuchin jokingly added that he was disappointed that the U.K. would not do a deal with the U.S. ahead of the EU given that it would be an easier negotiating partner.