France and the US have agreed on a truce regarding a dispute over a French tax on American tech companies.
Both President Emmanuel Macron and President Donald Trump agreed to extend negotiations to the end of the year, thereby postponing Washington’s threat of sanctions against Paris.
“Macron and Trump had a very constructive discussion…and they agreed to avoid all escalation between the US and France on this digital tax issue,” French Finance minister Bruno le Maire said on Tuesday just before a meeting with EU counterparts in Brussels.
Trade war postponed
According to AFP, a French diplomatic sources said the two leaders spoke by phone on Sunday agreeing to give negotiations a chance to “find a solution in an international framework.”
In doing so, they would avoid a trade war that would inevitably “benefit no one.”
On Monday, the French president tweeted that he and Trump would work together towards a better agreement “to avoid any tariff escalation.”
Trump returned the compliment with a tweet.
The two agreed to resume discussions towards the end of 2020, and to push ahead with broader negotiations at the Organization for Economic Cooperation and Development.
Until then, there won’t be successive tariffs.
Origins of dispute
The tensions erupted last year when Paris had approved of a levy of up to three percent on revenue earned by technology companies in France.
The announcement came at time when a new model for taxing revenues worldwide via online sales and advertising was also being discussed.
Currently tech companies such as Google, Apple, and Facebook among others, pay little tax in countries where they are not physically present.
US officials pushed back adding the tax singled out American companies and bit back with duties up to 100 percent on the value of French imports such as Champagne and Camembert cheese.
The European Union said it would support France if such tariffs were applied, increasing the likeliness of a transatlantic trade war.
Both Italy and Britain unveiled similar plans last year after France’s announcement.