Scholz vows to 'defend free trade' after Trump tariff threat

German Chancellor Olaf Scholz on Tuesday vowed to "defend free trade as the basis of our prosperity", a day after U.S. President Donald Trump threatened to impose tariffs and taxes on trade partners.

"Isolation comes at the expense of prosperity," Scholz told the World Economic Forum in Davos, Switzerland. "We will defend free trade as the basis of our prosperity, together with other partners."

"Europe is committed to free, fair world trade."

The leader of Europe's biggest economy, which is headed for February 23 elections, stressed that EU-US ties must remain strong but also said that "cool heads" would be needed as Trump was sure to "keep the world on tenterhooks".

Trump, in his inaugural address, promised duties on other countries "to enrich our citizens", and later said that he might impose 25 percent tariffs on Canada and Mexico as early as February 1.

In a blizzard of executive orders on his first day back in office, Trump also announced the US withdrawal from the Paris climate accord, declared a national emergency at the Mexican border and said that the Gulf of Mexico would be renamed the "Gulf of America".

"President Trump says 'America First' and he means it," said Scholz. "There is nothing wrong with keeping your own country's interests in mind. We all do that.

"It's just that cooperation and understanding with others are usually in your own interest as well."

- 'Cool heads needed' -

The German chancellor said that "the United States is our closest ally outside of Europe and I will do everything I can to ensure that it stays that way."

He said his "first good discussions with President Trump and the contacts between our advisors point in this direction".

Nonetheless, Scholz predicted that Trump and his administration "will keep the world on tenterhooks in the coming years in energy and climate policy, in trade policy, in foreign and security policy."

"We can and will deal with all of this."

Scholz, who cultivates a calm and even demeanor, added that "cool heads are needed".

"Not every press conference in Washington, not every tweet should plunge us into heated, existential debates."

Scholz said that strong trans-Atlantic ties are "essential for peace and security worldwide" and a "driver for successful economic development".

But he also argued that "we Europeans must be strong in our own right. We must become even more resilient and competitive, and we have what it takes.

"As a community of more than 450 million Europeans, we have economic weight... Germany is the third-largest economy in the world."

While seeking to reach out to Trump, Scholz condemned the stance of the president's billionaire ally Elon Musk, who has strongly backed the far-right Alternative for Germany party.

Scholz criticised Musk's support for "extreme-right positions", a day after the tech mogul sparked criticism with a gesture some likened to a Nazi salute.

"We have freedom of speech in Europe and in Germany," said Scholz when asked about the X, SpaceX and Tesla chief, who made the gesture at an event marking Trump's inauguration.

"Everyone can say what he wants, even if he is a billionaire," said Scholz. "What we do not accept is if this is supporting extreme right positions."

Musk, who has previously insulted Scholz on X, replied almost immediately with another expletive on his social media platform.

© Agence France-Presse