European bank bosses have warned that Donald Trump’s “America first” approach risks creating a more fragmented global economy, while predicting that it is unlikely to trigger an all-out trade war between the US and China.

Speaking t at the World Economic Forum in Davos ahead of Mr Trump’s arrival in the Swiss alpine town on Thursday, the heads of some of Europe’s biggest banks said that the consequences of a tit-for-tat escalation of tariffs between the world’s two biggest economies would be so dire that they did not believe it would happen.

Tariffs

This week the US imposed its first major tariffs on imports of solar cells and washing machines and key members of Mr Trump’s government have warned that America was preparing to intensify its measures to prevent what it sees as unfair trading practices around the world.

Mr Trump will host European executives on Thursday night to argue that the US is a better place for businesses as a result of the tax overhaul and deregulation, his National Economic Council director, Gary Cohn, said.

In his speech on Friday Trump is expected to elaborate on US trade policy . “He wants to shatter the myth that he is only an ‘America First’ president,” said Anthony Scaramucci, the financier who was briefly Mr Trump’s communications director and still informally advises the president. “That’s not the case. He is a globalist. He has a duality to his personality. He’s here to disrupt things, which he does a reasonably good to great job of.”

Bill Winters, chief executive of Standard Chartered, said: “The US appears to be taking a measured approach and I would expect the Chinese to take a measured approach in response.”

“You have to be concerned. But do I think there is going to be a bad outcome? No,” said the American-born boss of StanChart, which is listed in London but earns most of its revenue in Asia, Africa and the Middle East.

Ralph Hamers, chief executive of Dutch bank ING, said: “I see a further polarisation of the world economy. I can see some areas that really continue free trade and others that don’t, like the US and frankly the UK, at least until Brexit happens.”

Reciprocal

The downbeat comments by the European bankers, who were due to meet Mr Trump at a dinner in Davos on Thursday evening before his speech on Friday, contrasts with the more supportive remarks by US bankers, such as Jamie Dimon at JPMorgan Chase.

“When Americans speak and they talk about fair, they mean reciprocal. That’s not what the Chinese mean by fair,” Mr Dimon told CNBC.

The Trump administration faces deadlines for presidential action in the weeks ahead on national security investigations into imports of aluminium and steel and a wide-ranging probe of China’s intellectual property regime that many in Washington expect to lead to further tariffs and a crackdown on Chinese investment.

“I don’t think it will end up in a trade war because there are no gainers and it goes against progress,” said Francisco Gonzalez, chairman of Spain’s BBVA, which has large operations in Mexico and Turkey as well as Spain. However, he added that the fact the US president came to Davos was “a positive signal”.

Copyright The Financial Times Limited 2018/Bloomberg