Davos elite nod along as Trump delivers ultimatum

This week, world leaders, heads of major global corporations, and a few celebrities gathered in the Swiss town of Davos for the annual World Economic Forum. Meanwhile, across the Atlantic, President Donald Trump was launching his political comeback as the new U.S. president.

President Trump, in his inaugural address, declared that “nothing can stop us” and vowed to end America's “decline.” As the Davos forum neared its end, President Trump directly delivered his message of global dominance to the global elite via a White House webcam. He almost mesmerized the audience with a credible picture of a booming U.S. economy on the verge of new technological heights, while also threatening tariff sanctions on countries that do not move factories back to the United States.

President Trump stated that businesses exporting goods from overseas factories to the U.S. market would face trillions of dollars in tariffs, which would go into the U.S. treasury. “It’s your privilege,” he said with a smile that seemed straight out of a “Godfather” movie. Subsequently, he publicly rebuked Bank of America CEO Brian Moynihan, accusing the lending giant of “canceling” the bank accounts of many conservative supporters. He also awkwardly mumbled about sponsoring the World Cup.

In the first week of his second term, most in Davos were nodding in agreement, unsure of how else to respond. As an “America First” president was projected like a 30-foot-tall galactic emperor into the heart of the rules-based international economic order, two worlds were colliding. It's one thing to suggest to domestic voters that trade deficits are a problem, but quite another to suggest to G7 ally Canada at an international forum that they become part of your country, which drew gasps not only from Canadians but from everyone else present. His speech was both captivating and aggressive, employing both carrots and sticks towards the rest of the world.

As delegates digested the threats, invitations, and occasional praise, many seemed to be trying to gauge how much damage Trump might inflict on the global trading system, while also assessing how far ahead his U.S. is in the tech-driven AI boom. Davos, in its first week, became another extreme of Trump’s second term. His agenda was coherent: to use any means to lower energy prices, including pressuring Saudi Arabia to lower oil prices. He said this would not only help lower inflation but also economically deplete Russia's oil-dollar war chest to help end the war in Ukraine. A ceasefire in the Middle East had already earned Trump some geopolitical credibility in these circles.

Christine Lagarde, David Miliband, and John Kerry took turns entering the room. Bank heads also gathered on stage, praising the president before gently questioning him. The key question is: Will President Trump really threaten the world economic system as he did during the campaign? The answer will have implications for the next four years and perhaps longer. The answer sounded very affirmative. However, that does not mean it will work. Some of America's top CEOs told me they are preparing for retaliatory tariffs that may be imposed on their exports. They believe the president's love for a rising stock market will limit his use of tariffs. But no one really knows. In any case, much remains up in the air. He has already withdrawn from the World Health Organization.

Outside the meeting rooms, people were whispering about how his "2025 plan" allies are suggesting that the U.S. should also withdraw from the International Monetary Fund and the World Bank. In the wake of Trump's whirlwind, once the rest of the world decides to stand up again, they do have some countermeasures. Canada is now briefing on their retaliatory tariffs. In conversations with UK Business Secretary Jonathan Reynolds and EU Trade Chief Maros Sefcovic, I sensed their eagerness for a calm dialogue. They all made similar arguments, trying to dissuade Trump from imposing broader tariffs.

Mr. Reynolds told me that since the U.S. does not have a goods trade deficit with the UK, there is no need for tariffs. Mr. Sefcovic said that the U.S. should also consider its services surplus. But do they think that threats to G7 and NATO allies Canada and Denmark (regarding Greenland) are completely unacceptable, as absurd as France asking for Louisiana back? Mr. Sefcovic did not want to escalate the situation. Diplomats are compiling lists of U.S. goods that Europe can now buy to showcase President Trump's “victories,” from weapons to gas to magnets in wind turbines.

The rest of the G7 might unite to retaliate against tariffs in order to focus the attention of Congress, as well as the competing factions within Trump's court. But there is no sign of that happening yet. The story of American tech hegemony, represented by Amazon founder Jeff Bezos, Meta CEO Mark Zuckerberg, Apple leader Tim Cook, and Google CEO Sundar Pichai, who held prominent seats at this week’s inauguration, is strong. While the U.S. is far ahead of Europe, its competition with China is much more uncertain.

One topic of discussion at Davos was the DeepSeek high-performance, cheaper AI model made in China. Predictions that tech giants would be attacking each other in Trump's court started to come true within hours, not months. Meanwhile, while most (but not all) at Davos seemed to be captivated by Trump's tech-powered optimism, some in Europe also saw a once-in-a-lifetime opportunity to attract top researchers who were less than happy with the direction of U.S. politics. European Central Bank President Christine Lagarde publicly floated the idea.

Others took solace in the fact that Europe no longer has to deal with Biden's massive green subsidies, which again creates a more level playing field for Europe. President Trump is changing the rules of world trade. How the rest of the world responds is as important as the decisions made by the Trump administration itself. _January 24: The headline of this story has been updated to better reflect its content._