DAVOS - President Donald Trump insisted on Thursday that Palestinians had "disrespected" the United States and threatened to withhold aid worth hundreds of millions of dollars until they agree to US-brokered peace talks.
"They disrespected us a week ago by not allowing our great vice president to see them," Trump said during a meeting with Israeli Prime Minister Benjamin Netanyahu in Davos, Switzerland.
"We give them hundreds of millions," Trump added. "That money is not going to them unless they sit down and negotiate peace."
Palestinians were infuriated by Trump's recent decision to recognise Jerusalem as Israel's capital - which for decades both sides agreed would be the subject of negotiation.
Facing severe pressure at home, Palestinian leader Mahmoud Abbas responded by cancelling a planned meeting with US Vice President Mike Pence.
Palestinians, who also consider the divided city their capital, took to the streets in deadly riots after Trump's decision.
During the meeting with Netanyahu in Davos, Trump tried to convince a deeply sceptical Arab world that he could still be an honest broker.
"We have a proposal for peace. It is a great proposal for the Palestinians," Trump claimed, adding that Israel would also be forced to make concessions.
But Trump also doubled down, saying he would move the US embassy to Jerusalem as soon as next year, despite no suitably sized building existing.
"We anticipate having a small version of it open sometime next year," Trump said.
Netanyahu warmly welcomed Trump's "historic decision", saying it "recognises history, recognizes a certain reality, built on the basis of truth."
Trump joined the World Economic Forum in Davos with foreign exchange markets in turmoil and Washington's trading partners in uproar.
He smiled and waved as hundreds of onlookers at the gathering in the Swiss Alps held up cameraphones as he strode slowly into the conference venue.
One female admirer grabbed Trump's autograph while other delegates muttered - out of his earshot - about wanting to pelt him with fruit.
"It's very exciting to be here, we're very happy to be here. The US is doing very well," Trump said, before heading into bilateral talks with British Prime Minister Theresa May.
"This will be a very exciting two days," he said, after having demonised the globalist Davos crowd on his unorthodox march to the White House.
Other government leaders and business tycoons in Davos are agog at the tempestuous course of US policy under Trump. He is due to address the forum on its closing day Friday at the end of a week that saw his administration announce a new package of trade tariffs and spark turmoil on the currency markets.
"I think the most fascinating thing with President Trump is that he has the capacity to surprise, and I'm sure we will be surprised tomorrow," Alexander Stubb, former prime minister of Finland and the new vice president of the European Investment Bank, told AFP in Davos.
Traders and US partners already got one surprise in Davos this week when Trump's treasury secretary, Steven Mnuchin, appeared to back away from decades of support by his predecessors for a "strong dollar" policy by declaring "a weaker dollar is good for us", flouting US commitments in international fora such as the G20.
International Monetary Fund chief Christine Lagarde Thursday urged Mnuchin to "clarify" his stance on the dollar, which slumped on his remarks, and European Central Bank chief Mario Draghi reminded trading partners to "refrain" from language that could cause currency volatility.
A weak dollar would potentially boost US exporters but cause headaches for all other trading nations.
"We are not concerned with where the dollar is in the short term, it is a very liquid market and we believe in free currencies," the Mnuchin told reporters Thursday.
His latest comments helped depress the dollar to a three-year euro low and were taken as reinforcing a broad offensive in trade built on the "America First" platform, drawing the ire of French Finance Minister Bruno Le Maire.
"We want exchange rates to reflect economic fundamentals... and we shouldn't play with these rates," he said in Davos.
'Race to the bottom'
The new tariffs imposed this week on solar panels and large washing machines, which infuriated China and South Korea, combined with big cuts to the US corporate tax, are accentuating foreign concern that the US is abandoning its role as protector of the global trade order.
Business leaders in Davos have this week given a broad welcome to Trump's controversial tax reforms, but European political leaders fear a "race to the bottom" as the US gains in appeal to foreign investors.
Aside from his speech and talks with May, Trump is expected to meet with Rwandan President Paul Kagame on Friday.
With Kagame, who currently chairs the African Union, Trump will likely try to turn a page on his reported derogatory comment about "shithole" African countries.
Nice or nasty?
A year ago, the Davos spotlight was claimed by China's communist leader Xi Jinping, who took up the torch of global trade to the delight of the well-heeled audience then anxious about Trump's inauguration.
The Davos elite are keen now to see which version of Trump will show up - the business-friendly tycoon or the leader who berated the rest of the world at the UN General Assembly last September.
"I think they've already built down their expectations so far that anything he may say that's conciliatory, they'll be grateful for," Robert Kaplan, senior fellow at Washington's Center for a New American Security, told AFP at the forum.
"Yes, people like the fact that markets are high and America has reformed its taxes, but people are very nervous about geopolitics around the world and they are very nervous partially because of Trump," he said.
French President Emmanuel Macron and German Chancellor Angela Merkel "stole the show" at Davos already, Kaplan added, after the European leaders used separate speeches on Wednesday to push back hard against the Trump manifesto.