At Davos, US and EU increase invective to clash over cars and digital taxes

The US and Europe looked set for a renewed clash over everything from car tariffs to digital taxes in a sign that a new American focus was emerging following president Donald Trump’s trade truce with China.

At Davos, US and EU increase invective to clash over cars and digital taxes

By Piotr Skolimowski, Jenny Leonard, and Saleha Mohsin

The US and Europe looked set for a renewed clash over everything from car tariffs to digital taxes in a sign that a new American focus was emerging following president Donald Trump’s trade truce with China.

Speaking at the World Economic Forum in Davos, Switzerland, US commerce secretary Wilbur Ross said the US was still considering slapping levies on European auto imports even as it hopes for a “peaceful resolution” of differences.

Treasury secretary Steven Mnuchin declined to say if he was still pushing for an optional digital tax after an agreement for a global framework was reached with France this week.

Earlier in the week, Mr Trump abandoned his conciliatory approach to his transatlantic allies and lambasted Europeans for having trade barriers and said they were “more difficult to do business with than China”.

Any tariffs on cars would be particularly painful for Germany, whose manufacturing is already in a slump as a result of the US-China trade war.

“The threat of tariffs has led to people being willing to renegotiate trade deals,” said Mr Mnuchin. “The purpose is to get free and fair and reciprocal trade.”

Mr Trump put European leaders on notice this week, renewing a threat to hurt the economies of transatlantic allies if they aren’t willing to compromise on a trade deal before the US elections.

“The president has not ruled out putting in tariffs if the negotiations fail,” said Mr Ross. “We have not abandoned the tariffs, they are still available. We hope they will not be used.”

Speaking in an interview, Dutch prime minister Mark Rutte said he discussed the issue of car tariffs with Mr Trump and he believes they will be able to work out a deal. “We are united in the European Union on trade, we always have been, it’s one of the few very successful things we are doing,” he said.

The EU and US have also clashed over European efforts to tax technology companies.

Last year, France introduced a 3% levy on the digital revenue of companies that make their sales primarily online, such as Facebook and Google. The US threatened tariffs as high as 100% on $2.4bn of French goods, saying the measure discriminates against American businesses.

The US and France temporarily resolved the issue this week. At a meeting with Mr Mnuchin on the sidelines of the World Economic Forum, French finance minister Bruno Le Maire agreed to delay collecting the digital tax until the end of 2020.

In exchange, the US will refrain from imposing the punitive tariffs on French goods it had threatened as retaliation.

But the detente is no guarantee that an accord will be reached. Mr Mnuchin declined to say if the US was still pushing for a global

digital tax to be optional, a red line for Mr Le Maire.

“An optional tax is a contradiction in terms,” said Mr Le Maire. “I know of no one who voluntarily pays a tax.”

Mr Le Maire said France will only ultimately refrain from imposing its levy in 2020 if there is a global agreement on taxation at the Organisation for Economic Cooperation and Development. Talks at the OECD, however, have been dragging on for years and involve more than 135 countries.

European commissioner for economic affairs Paolo Gentiloni said that if the OECD effort fails then the EU will push for a digital tax of its own.

Chancellor of the exchequer Sajid Javid said in Davos that the UK also plans to go ahead with a tax on digital services in April.

“A trade war is in no one’s interest. It’s not in the interest of the US, it’s not in the interest of Europe,” said Mr Le Maire.

“It reduces growth, it destroys employment and destroys economic activity.”

Bloomberg

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