The European Commission has issued a warning shot that it will react "swiftly and appropriately" if the United States starts a trade war with it.
In a televised interview with Piers Morgan, the president spoke negatively about how the EU treated the US in relations to trade.
Trump said that the EU was not all it was "cracked up to be" and that its trade terms were unfair.
Disagreements over trade between the EU and the US could escalate, he warned.
Trump said: "It's a very unfair situation. We cannot get our product in. It's very, very tough. And yet they send their product to us – no taxes, very little taxes, it's very unfair.
"I've had a lot of problems with the European Union and it may morph into something very big from that standpoint, from a trade standpoint.
"The European Union treated the United States very unfairly when it came to trade.
"They're not the only ones, by the way. I could name many countries and places that do. But the European Union has been very very unfair to the United States and I think it'll turn out to be very much to their detriment."
But Europe warned of a "robust response" if there were a trade war.
A spokesperson in Brussels said: "For us, trade policy is not a zero-sum game, it is not about winners and losers. We in the European Union believe that trade can and should be win-win.
"We also believe that while trade has to be open and fair it has also to be rules-based. The European Union stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the United States."
Trade has been a longstanding policy point for the president, with attempts to address what he perceives as imbalances within the North American Free Trade Agreement (Nafta) and the Trans-Pacific Partnership (TPP) as well as with individual nations such as China.
In his speech at the World Economic Forum in Davos, Trump said that trade had to be "fair and reciprocal".