Boris Johnson has warned Donald Trump that both their countries will suffer if the US starts a trade war in the increasingly bitter dispute over the UK’s “tech tax”.
The prime minister hit back after Washington threatened retaliation – probably a tax on UK car exports to the US – when a two per cent levy on the likes of Google and Facebook is imposed in April.
In response, Mr Johnson’s spokesperson said: “Imposing additional tariffs would harm businesses and consumers on both sides of the Atlantic.”
And, asked if the UK would seek to impose its own further tariffs, he said only: “Let’s focus on the here and now.”
The threatened trade war has come at the worst time for Downing Street, as it seeks to fast-track an agreement to boost transatlantic trade – the supposed prize of leaving the EU at the end of the month.
Instead, Mr Mnuchin said the US president would lobby the prime minister over the proposed tax, which he described as “discriminatory”.
The UK is determined to plough ahead, believing the massive tax avoidance by the US tech giants “undermines public trust” in the fairness of the tax system.
Speaking alongside Mr Mnuchin in the Swiss city, the chancellor Sajid Javid said: “We plan to go ahead with our digital services tax in April.”
The message was underlined by the prime minister’s spokesperson, who insisted it was necessary but would only remain in place until there was an international agreement.
“We are fully engaged in international discussions to address the challenges digitalisation poses for tax,” he said.
“Our strong reference is for an appropriate global solution. It has taken too long to address this issue at international level and so we will continue to introduce our digital services tax in April in the absence of a global solution.”
However, should Mr Trump win re-election in November, the prospects for an international agreement on how to tax the tech giants would diminish further.
France had appeared ready to drop its own plan for a 3 per cent levy on the largest firms, after Washington vowed to put taxes on French imports including wine.
However, there were suggestions in Davos that, although Paris would not collect the tax this year, it would still accrue and the companies forced to pay up if there is no agreement.