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France and U.S. Move Toward Temporary Truce in Trade War France and U.S. Move Toward Temporary Truce in Trade War
(about 1 hour later)
PARIS — France and the United States appeared to strike a temporary truce in a trans-Atlantic trade war, French officials said Tuesday, after President Emmanuel Macron agreed to suspend a tax on American technology giants in exchange for a postponement of threatened retaliatory tariffs on French goods by the Trump administration. PARIS — France and the United States appeared to strike a temporary truce in a trans-Atlantic spat, French officials said Tuesday, after President Emmanuel Macron agreed to suspend a tax on American technology giants in exchange for a postponement of threatened retaliatory tariffs on French goods by the Trump administration.
The apparent détente emerged after Mr. Macron and President Trump agreed in a phone call late Sunday to grant more time for negotiations over a global solution to taxing Amazon, Facebook and other digital companies.The apparent détente emerged after Mr. Macron and President Trump agreed in a phone call late Sunday to grant more time for negotiations over a global solution to taxing Amazon, Facebook and other digital companies.
“We will work together on a good agreement to avoid tariff escalation,” Mr. Macron said on Twitter Monday. “Excellent!” Mr. Trump replied on the social media platform.“We will work together on a good agreement to avoid tariff escalation,” Mr. Macron said on Twitter Monday. “Excellent!” Mr. Trump replied on the social media platform.
A deal between the two countries would buy time for the development of an international framework to prevent large multinational companies and digital giants from avoiding taxes by shifting profits between countries. Mr. Trump, who is at the World Economic Forum in Davos, Switzerland, said on Tuesday that he and Mr. Macron had a “good conversation” and that the United States “is very happy with the result.”
“We appreciate very much what President Macron did,” Mr. Trump said, though he declined to elaborate on what the two leaders had agreed upon. White House officials also declined on Tuesday to confirm the scope of the apparent deal. In a statement released late Monday, they said the heads of state had “agreed it is important to complete successful negotiations on the digital services tax.”
A deal between the two countries would buy time for the development of an international framework to prevent large multinational companies and digital giants like Facebook, Amazon and Google from avoiding taxes by shifting profits between countries.
Negotiations are continuing at the Organization for Economic Cooperation and Development, but the slow pace of the talks has frustrated European officials — and especially the French government, which has insisted that digital businesses must pay “fair taxes.”Negotiations are continuing at the Organization for Economic Cooperation and Development, but the slow pace of the talks has frustrated European officials — and especially the French government, which has insisted that digital businesses must pay “fair taxes.”
France’s finance minister, Bruno Le Maire, said Tuesday at a meeting in Brussels with European Union officials that Presidents Macron and Trump had “agreed to avoid all escalation between the U.S. and France on this digital tax issue.” But he cautioned that discussions on finding a compromise “remain difficult.” France’s finance minister, Bruno Le Maire, said Tuesday at a meeting in Brussels with European Union officials that Mr. Macron and Mr. Trump had “agreed to avoid all escalation between the U.S. and France on this digital tax issue.” But he cautioned that discussions on finding a compromise “remain difficult.”
White House officials declined on Tuesday to confirm the scope of the apparent deal. Late Monday, they released a statement that said the heads of state had “agreed it is important to complete successful negotiations on the digital services tax.” Mr. Le Maire is scheduled to meet with Treasury Secretary Steven Mnuchin in Davos on Wednesday to discuss next steps.
Mr. Le Maire is scheduled to meet with Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos, Switzerland, on Wednesday to discuss next steps. The fight is not just limited to France. Silicon Valley’s tech giants are a target for much of Europe. Last summer, the European Commission unveiled a proposal to significantly revamp how the companies are taxed in the 28-nation European Union.
Silicon Valley’s tech giants are a target for Europe. Last summer, the European Commission unveiled a proposal to significantly revamp how technology companies are taxed in the 28-nation European Union. Many American companies have been increasingly alarmed by the potential proliferation of digital taxes across Europe and other wealthy nations. On Tuesday, Mr. Mnuchin said in an interview with The Wall Street Journal that the United Kingdom and Italy could also face tariffs if they impose digital taxes.
The attempt to prevent global companies from avoiding taxes has intensified a fight between the United States and Europe, as policymakers on both sides of the Atlantic spar over efforts to impose new taxes on foreign firms.The attempt to prevent global companies from avoiding taxes has intensified a fight between the United States and Europe, as policymakers on both sides of the Atlantic spar over efforts to impose new taxes on foreign firms.
France drew special scorn from President Trump after officials announced plans to impose a 3 percent tax starting Jan. 1 on the revenues that companies earn from providing digital services to French users. The government estimated a €500 million (about $563 million) windfall. France drew special scorn from Mr. Trump after officials announced plans to impose a 3 percent tax starting Jan. 1 on the revenues that companies earn from providing digital services to French users. The government estimated a €500 million (about $563 million) windfall.
Mr. Trump insisted that only the United States could tax American-based companies, and threatened to retaliate with American tariffs of up to 100 percent on French wine, cheese, handbags and more.Mr. Trump insisted that only the United States could tax American-based companies, and threatened to retaliate with American tariffs of up to 100 percent on French wine, cheese, handbags and more.
On Tuesday, Mr. Le Maire signaled that France would take a step back from the dispute by offering to postpone collection of the tax until the end of 2020, giving time for negotiators at the O.E.C.D., an intergovernmental economic organization with 36 member countries, to hammer out an agreement on a broader framework to tax digital firms.On Tuesday, Mr. Le Maire signaled that France would take a step back from the dispute by offering to postpone collection of the tax until the end of 2020, giving time for negotiators at the O.E.C.D., an intergovernmental economic organization with 36 member countries, to hammer out an agreement on a broader framework to tax digital firms.
The Trump administration has turned to tariffs as a source of leverage in trade negotiations and other transnational disagreements. The threat, or imposition, of painful levies has prompted China, Mexico, Canada and other countries to sign trade deals with the United States. Yet the Trump administration has been slow to negotiate new trade terms with Europe. The O.E.C.D.’s original proposal, released late last year, would allow countries to tax large multinationals even if they did not operate inside their borders. It suggests companies should pay taxes largely based on where their sales occur.
The digital tax is one of the thorniest issues around. The O.E.C.D.’s original proposal, released late last year, would allow countries to tax large multinationals even if they did not operate inside their borders. It suggests companies should pay taxes largely based on where their sales occur, and on which profits are subject to taxation.
“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence,” the proposal states.“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence,” the proposal states.
Mr. Le Maire has been especially vocal about taxing Facebook and other big digital players, saying governments must stand up to tech behemoths that have become the equivalent of sovereign states and act with virtual impunity, maneuvering to keep their tax bills low across the world.Mr. Le Maire has been especially vocal about taxing Facebook and other big digital players, saying governments must stand up to tech behemoths that have become the equivalent of sovereign states and act with virtual impunity, maneuvering to keep their tax bills low across the world.
In a recent speech, he noted that 15 countries will have their own national tax on digital giants by June, including Italy and Austria. The Czech Republic, Britain, Turkey, Israel and India are also making plans.In a recent speech, he noted that 15 countries will have their own national tax on digital giants by June, including Italy and Austria. The Czech Republic, Britain, Turkey, Israel and India are also making plans.
“Digital taxes are going to happen one way or another. We prefer an international solution. But it’s up to the U.S. to decide,” he said.“Digital taxes are going to happen one way or another. We prefer an international solution. But it’s up to the U.S. to decide,” he said.
Jim Tankersley contributed reporting from Washington, D.C. The Trump administration has pushed for a multinational agreement through the O.E.C.D., but those negotiations turned more heated in recent months, after Mr. Mnuchin and Angel Gurria, the O.E.C.D.’s secretary-general, exchanged letters that sharply disagreed over a new American proposal for how to resolve the talks.
Mr. Trump has made clear he will use tariffs to settle disputes that he thinks run counter to American interests.
He has repeatedly turned to tariffs as a source of leverage in trade negotiations and other transnational disagreements, using them to help elicit deals with China, Mexico, Canada and other countries.
During a speech in Davos, Mr. Trump revived an earlier threat to impose tariffs on European cars, saying that while he expected to make a trade deal with Europe, he would give levies “a very strong consideration” if the deal did not materialize.
The United States had “been treated very badly” on trade by Europe for “many, many years” despite having spent heavily to protect Europe through the North Atlantic Treaty Organization, Mr. Trump claimed.
“We’re protecting Europe and that’s fine, but they can’t do it to us on trade,” he said. “So they know they have to do something. And if they’re fair, we’re not going to have a problem. Okay?”
The Trump administration quietly allowed a deadline for imposing tariffs on European cars to lapse last November. Many trade experts have now concluded that the administration could not legally impose those tariffs without starting a new investigation into European trade practices.
Mr. Trump has used the threat of car tariffs to compel Canada, Mexico, Japan and South Korea to make concessions at the negotiating table. But the European Union has so far been unbowed.
The governments have also made little progress toward negotiating a trade deal that they first announced plans for in 2018. The Trump administration has insisted that agriculture be included in that deal, while the European government has said they do not have a mandate to negotiate on the issue.
In his first visit to the United States last week, Phil Hogan, the new European trade commissioner, suggested that the governments may have found a way forward. Instead of more broadly opening up agricultural markets, the deal might focus on paring back some of the health and sanitary standards that block agricultural products from each others’ markets, Mr. Hogan said. American officials have yet to confirm that approach.
In an earlier meeting with Ursula von der Leyen, the new president of the European Commission, Mr. Trump praised Ms. von der Leyen as a tough negotiator. He acknowledged that the governments had been talking about a trade deal for a while, “and hopefully we can get something done.”
Jim Tankersley and Ana Swanson reported from Washington.