At a closed-door Davos dinner, the US Secretary of Commerce harshly criticized Europe for "lacking competitiveness," prompting Lagarde to leave in anger.

At a closed-door dinner in Davos, the increasingly tense trade and economic relations between the United States and Europe were brought to light by a diplomatic spat.

According to sources cited by Bloomberg on the 21st, this exclusive event, open only to invited guests, was held on Tuesday evening and attended by over 100 people. Lutnick, as the keynote speaker, spoke bluntly, belittling European economies, comparing them to the economic strength of the United States, and criticizing Europe’s lack of competitiveness. As his criticism escalated, many of the Europeans present became uncomfortable, prompting Lagarde to leave the venue.

This diplomatic incident comes at a sensitive moment in global trade, reflecting the widening rift between the Trump administration and its European allies. Just the morning after the event, Lagarde warned in an interview with RTL radio that “the curtain is rising on a new world order,” hinting that the U.S. threat of tariffs and restrictions on global trade is not what allies do. She emphasized that this new order is forcing Europe to rethink its economic structure and alliance strategy with other rule-following countries.

A European CEO, requesting anonymity, expressed support for Lagarde’s departure, stating that Europe needs to start defending its own interests. Meanwhile, Lutnick’s remarks at the dinner were not universally accepted; according to sources, he met with some boos during his speech. Wall Street also expressed differing views. JPMorgan CEO Jamie Dimon said at Wednesday’s forum that although Europe does have weaknesses, he would handle disagreements in a more polite way, aiming to make the region stronger rather than more divided.

The Dinner: Seating Arrangement and Sharp Criticism

Sources told Bloomberg that the atmosphere that night was quite tense. Besides Lutnick, the keynote speaker, U.S. Trade Representative Jamieson Greer was seated at the main table, along with BlackRock CEO Larry Fink. By contrast, Lutnick was placed in a less desirable back-row seat.

In his subsequent speech, Lutnick sharply criticized Europe’s economic performance. Sources told Bloomberg he disparaged European economies and their so-called “lack of competitiveness” compared to American strength. These blunt criticisms made the European elite present feel embarrassed and uneasy. As his remarks grew sharper, Lagarde ultimately left in protest. The European Central Bank declined to comment on the incident, and a spokesperson for Lutnick did not immediately respond to requests for comment.

Lagarde’s Response and the “New World Order”

As a former French Finance Minister and most of Trump’s first term International Monetary Fund (IMF) Managing Director, Lagarde is no stranger to the Trump administration’s policy style. As early as the beginning of 2024, she had warned that Trump’s return to the White House could spell trouble for Europe.

The day after the dinner incident, Lagarde responded forcefully in a public appearance. In an interview, she stated clearly that threatening to buy Greenland and brandishing tariff weapons are not behaviors one expects from an ally. She called on Europe to re-evaluate its economic strategy and strengthen links with nations that follow shared rules in this “new world order.” This statement hints that the European Central Bank and the EU’s decision-makers are preparing for a potential shift towards a more isolationist and protectionist U.S. trade policy.

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