The United States has threatened to impose tariffs on UK-made automotive products if the country proceeds with its planned digital services tax. US Treasury Secretary Steven Mnuchin issued the threat on Wednesday, stating that the country will not hesitate to retaliate against Europe.
Mnuchin's statement was made during the ongoing World Economic Forum in Davos, Switzerland. The US official added that the digital services tax imposed by France is completely unfair to US-based Internet companies.
Apart from France, both the UK and Italy are also considering imposing a similar tax on foreign digital services companies such as Google and Facebook. When asked about the US' move if Britain does impose a digital service tax, Mnuchin replied by stating that the country is prepared to "arbitrarily" tax UK car companies in retaliation.
Additional tariffs on UK-made cars could be devastating to the country's automotive industry, which has already been negatively affected by Brexit. The uncertainty over the country's plan to exit the European Union has caused its auto industry to steeply decline over the past few years. According to the UK Society of Motor Manufacturers and Traders, auto production in the country has continually declined over the last 17 months.
The UK's finance minister, Sajid Javid, had previously stated that the government would push ahead with its plan to impose a digital service tax in April this year. However, the official clarified that a number of "private conversations" between the UK and the US will be held to work out the issue, with hopes of finding a better solution.
One of the solutions proposed by officials is to come to an amicable agreement regarding the process of taxing digital services sold by foreign companies. This will involve coming up with agreed upon regulations and figures, which is reportedly now being discussed at the Organization for Economic Cooperation and Development event.
While the United States has vowed to significantly increase taxes on goods imported from France following its imposition of the digital service tax, US President Donald Trump has agreed to a temporary truce while he meets with French President Emmanuel Macron to discuss the issue this week. The US previously stated that it would increase taxes of French goods such as cheese, wine, and other luxury items.
As part of the ceasefire agreement between the US and France, the latter has agreed to temporarily suspend the collection of its digital services tax until the end of the year. Meanwhile, the US had agreed not to increase taxes imposed on French imports to the country.
