United States President Donald Trump promised Prime Minister Netanyahu that the US Embassy would move to Jerusalem and threatened to cut off all aid to the Palestinian Authority unless they agree to negotiations with Israel.

"We have discussions going with Israel on many things including trade," Trump said at the World Economic Forum in Davos. “But the big move, and something that is very historic and very important is the fact that we’re moving the embassy to Jerusalem," added Trump. "It’s way ahead of schedule, by years."

“We anticipate a small version [of the embassy] working sometime next year,” Trump continued.

Trump maintained that his decision to recognize Jerusalem as Israel's capital advanced the possibility of peace, a position held by Israel as well. “The hardest subject they had to talk about was Jerusalem. We took Jerusalem off the table. So we don’t have to talk about it anymore. They never got past Jerusalem. We took it off the table. We don’t have to talk about it anymore," contended Trump.

Trump also threatened to cut off all monetary aid to the Palestinian Authority unless they agreed to resume negotiating with Israel and harshly criticized the Palestinian Authority for boycotting Vice President Mike Pence when he visited Israel earlier this week. "They disrespected us a week ago by not allowing our great vice president to see them, and we give them hundreds of millions of dollars in aid and support — tremendous numbers, numbers that nobody understands" charged the president.

"That money is on the table. That money is not going to them unless they sit down and negotiate peace,” Trump threatened, alluding to the generous financial aid the United States provides the PA. “Because I can tell you that Israel does want to make peace. And they’re going to have to want to make peace too, or we’re going to have nothing to do with them any longer. This was never brought up by other negotiators, but it’s brought up by me.”

"Respect has to be shown to the US or we’re just not going any further. Why should we do that as a country if they’re doing nothing for us?" Trump asked."We have a great proposal for the Palestinians, but respect has to be given."

Trump also hailed the relationship between the United States and Israel. "We’ve developed a great relationship, both as countries where I think it’s never been stronger. I can honestly say that, and also as personal friends" said Trump.

Netanyahu also used the meeting to thank Trump for recognizing Jerusalem as Israel's capital last month, telling the president that the move is "etched in the hearts of our people for generations to come. The move recognizes history, recognizes reality, and peace can only be built on the basis of truth."

Netanyahu saved special praise for Trump's opposition to the 2015 nuclear deal. "You said it’s a disastrous deal, you said if its fatal flaws are not fixed you should walk away from it, and I want you to know that if you decide to do that, then we will back you all the way," Netanyahu told the president.

Trump's threat to cut all monetary aid the US grants the Palestinian Authority seemingly confirms a report on Wednesday which said the State Department is considering punishing the PA further over its aggressive reaction to Trump's Jerusalem recognition.

The report said that the cutting of funding to the PA is being pushed by Nikki Haley, the U.S. Ambassador to the UN, who was also the driving force behind the U.S. decision last week to cut a significant portion of its funding to UNRWA, the UN agency for “Palestinian refugees”.

Haley was quoted in the report as saying that PA chairman Mahmoud Abbas needs to pay a price for disrespecting U.S. President Donald Trump in his recent speech to the PLO Central Council.