PRESIDENT Donald Trump said he would ask Saudi Arabia and other Opec nations to “bring down the cost of oil” and reiterated his threat to use tariffs to bring manufacturing back to the US as he addressed world leaders gathered in Davos on Thursday (Jan 23).
Trump also said he would demand an immediate drop in interest rates, which he said had ratched up deficits and resulted in what he cast as economic calamity under the tenure of his predecessor, Joe Biden.
“This begins with confronting the economic chaos caused by the failed policies of the last administration,” Trump said. “Over the past four years, our government racked up US$8 trillion in wasteful deficit spending and inflicted nation wrecking energy restrictions, crippling regulations and hidden taxes like never before.”
Trump, who appeared virtually, told leaders a key push in his second term would be using tariffs to drive manufacturing back to the US.
“If you don’t make your product in America, which is your prerogative, then very simply, you will have to pay a tariff, differing amounts, but a tariff which will direct hundreds of billions of dollars, and even trillions of dollars into our Treasury,” Trump said.
He also hailed commitments by companies to invest in the US, touting plans by SoftBank Group to help build artificial intelligence infrastructure and a promise from Saudi Arabia’s Crown Prince Mohammed Bin Salman to expand investments and trade with the US by US$600 billion.
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Trump said he would pressure the crown prince to raise that figure to US$1 trillion and expressed dismay that the Saudis and other Opec nations had not acted sooner to help reduce oil prices. The president predicted the cartel could decrease inflation and allow for the reduction of interest rates by lowering oil prices. He said doing so would also pressure Russia to end the war in Ukraine.
“With oil prices going down, I’ll demand that interest rates drop immediately,” Trump said. “And likewise, they should be dropping all over the world.”
After delivering opening remarks, Trump took questions from WEF President Borge Brende and a select group of executives, who included Blackstone Inc.’s Stephen Schwarzman, Bank of America Corp.’s Brian Moynihan, TotalEnergies SE’s Patrick Pouyanne and Banco Santander SA’s. Ana Botin.
“I’m sure the crown prince of Saudi Arabia will be really glad you gave this speech today,” Schwarzman joked.
Trump is addressing the gathering of finance and business CEOs, central bank governors and political officials remotely, because of his inauguration this week, but his return to power has dominated the annual meeting – received with both enthusiasm from some quarters and concern about the policies ahead.
Trump last spoke at the forum in 2020, addressing CEOs in person only weeks before the Covid-19 pandemic shut down the world’s economy. He used that appearance to confront European leaders and urge them to compromise in trade talks or risk crippling levies on the heels of his deals with China and the US-Mexico-Canada Agreement.
This term, the president has vowed to usher in a “golden age” for the US, moving to crack down on undocumented migration, and reiterating plans to hit neighbouring Mexico and Canada with tariffs. He’s also insisted that levies on China and the European Union remain on the table.
European leaders have also been rankled by Trump’s decision to pull the US out of the Paris climate accords – although the move was not a surprise and fulfils one of the president’s campaign promises.
Domestically, Trump has moved to undo Biden-era policies designed to fight climate change, while also boosting US fossil fuel production and filling up depleted oil reserves. He has also ordered his administration to consider eliminating subsidies and policies favouring electric vehicles.
The president’s moves to increase domestic energy production come at a time when European industry is coping from soaring energy costs and leaders worry about the impact on keeping their companies competitive.
In the US, Trump has been cheered by many of Wall Street and Silicon Valley’s most prominent and wealthy executives, won over by pledges to renew and expand tax breaks, including a lowering of the corporate rate, slash regulation and spur energy production – despite anxiety over the impact of tariffs on trade flows and immigration crackdowns. That shift is also evident at Davos, where many business and political leaders have accepted his return.
The Davos elite initially breathed a sigh of relief when Trump did not start new trade wars on day one but they’re also aware of his fervent belief in tariffs and acknowledge it’s a matter of time until he imposes the first tranche. World leaders, including both those who are ideological allies as well as those more critical of his worldview, have come around to the reality that he’ll be their counterpart for the next four years and that they must find a way to engage him.
Even world leaders who have been targeted by billionaire Trump backer Elon Musk have sought to downplay tensions.
Trump has generally struck a much less hawkish tone on China than many expected. He’s spoken to Chinese President Xi Jinping and is intent on saving ByteDance’s social media app TikTok from being shut down after once claiming it was a national security threat.
Still, Trump already floated 10 per cent tariffs on China as well as 25 per cent duties on Mexico and Canada to be announced by Feb 1. He signed a broad executive order on Monday that gives his Cabinet agencies until April one to study the US’s trading relationships with every country in the world – giving him a pretext to impose tariffs or other measures.
It’s unclear what happens on Feb 1, as most of his economic team awaits US Senate confirmation and there continues to be an internal debate about which legal authorities to use. BLOOMBERG
