France’s President Emmanuel Macron and US leader Donald Trump agreed to a truce in their dispute over digital taxes, a French diplomat stated. The agreement means that neither France nor the US will impose punitive tariffs this year. “Great discussion with Donald Trump on digital tax,” Mr Macron said on Monday in a tweet. “We will work together on a good agreement to avoid tariff escalation.” The National Business, Mr Trump on Twitter responded with “excellent” to the post, without providing any more details. He is on his way to Davos, Switzerland, for the World Economic Forum.
Still, the possible respite may defuse transatlantic tensions that had been building between Washington and Brussels along another potential trade war front. Last week, Trump signed a cease-fire with China in phase one of a broader deal aimed at balancing trade between the world’s two largest economies. The European Union is an even bigger U.S. trading partner than China and supply chains between the two economies, particularly in automotive and financial services industries, intertwined in ways that would make a tit-for-tat tariff dispute even more harmful to the world economy.
France and the U.S. will continue negotiations along with their European partners until the end of 2020 to agree a global framework that ensures tech companies pay an appropriate amount of tax. Macron’s government still hopes to find a solution that fits within discussions at the Organization for Economic Cooperation and Development’s work on the issue, the official continued, asking not to be identified in line with French government rules. European finance ministers meeting in Brussels Tuesday will discuss progress of the OECD talks. While the OECD is still working on its proposal for taxing tech companies around the world, France pushed ahead with its own levy last year that hit U.S. internet giants like Google, Apple Inc. and Amazon.com Inc.
The dispute was another headache for European trade officials scrambling to expand their policy arsenal as the U.S. takes aim at a rules-based system for global trade that Trump argues is outdated and tilted against America. It also coincided with a change in leadership at the European Commission, the EU’s executive arm. EU trade commissioner Phil Hogan visited Washington last week for the first time in the job, partly to plead for talks rather than tariffs in disagreements like the French digital tax. At stake, he said, was transatlantic trade in goods and services valued at more than $3 billion a day.
The two countries were on the brink of a trade war after Macron imposed digital revenue tax on many American companies last year and the U.S. threatened to hit back with tariffs as high as 100% on $2.4 billion worth of French goods. French Finance Minister Bruno Le Maire said earlier on Monday that the talks were “one of the most difficult negotiations I’ve ever been involved in.” The EU, meanwhile, is pressing ahead with a plan for tariffs against the U.S. in a parallel WTO case over unlawful subsidies to Boeing Co.