Macron backs down on digital tax following Trump’s tariff threats

File photo. France's President Emmanuel Macron (R) meets US President Donald Trump (L) at the official welcome during the G7 summit in Biarritz, France, 24 August 2019. [Pool/EP{A/EFE]

French President Emmanuel Macron said on Monday (20 January) he had a “great discussion” with US President Donald Trump over a digital tax planned by Paris and said the two countries would work together to avoid a rise in tariffs.

Macron and Trump agreed to hold off on a potential tariffs war until the end of 2020, a French diplomatic source said, and continue negotiations at the Organization for Economic Cooperation and Development (OECD) on the digital tax during that period.

“They agreed to give a chance to negotiations until the end of the year,” the source said. “During that time period, there won’t be successive tariffs.”

France decided in July to apply a 3% levy on revenue from digital services earned in France by firms with revenues of more than 25 million euros ($28 million) in France and 750 million euros worldwide. Washington has threatened to impose taxes on French products in response.

Trump fought back, the US government announcing last November that it may slap punitive duties of up to 100% on $2.4 billion in imports from France of Champagne, handbags, cheese and other products.

US vows 100% tariffs on French Champagne, cheese, handbags over digital tax

The US government on Monday (2 November) said it may slap punitive duties of up to 100% on $2.4 billion in imports from France of Champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm US tech companies.

French authorities have repeatedly said any international agreement on digital taxation reached within the OECD would immediately supersede the French tax.

The White House said on Monday both Trump and Macron agreed it is important to complete successful negotiations on the digital services tax.

We will ‘react as one’, EU tells US over French digital tax dispute

The European Commission wants to settle the latest trade dispute with the US over the French digital tax “amicably”, but warned that the bloc will “react as one” if Washington slaps tariffs on Paris.

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