The latest ratcheting up of pressure by the US underlined the difficulty of achieving both countries’ ambition to secure a trade agreement this year.
The US has threatened to put “arbitrary” tariffs on UK car exports as the war of words between the two countries over digital services taxes heated up.
Speaking at the World Economic Forum in Davos, Steven Mnuchin, the US Treasury secretary, warned of consequences if the UK went ahead with implementing its proposed tax in April.
“If people just arbitrarily want to put taxes on our digital companies, we will consider putting taxes arbitrarily on car companies,” Mr Mnuchin said when asked about the UK plans for a digital services tax.
About 18 per cent of the cars made in the UK are sold to the US, compared with 53 per cent sold to Europe, according to SMMT data from 2018.
Speaking on the same panel as Mr Mnuchin, UK chancellor Sajid Javid remained resolute in the face of threats of US tariffs on Range Rovers, Minis and Bentleys. He said the UK “plans to go ahead” with the tax, stressing that “it is a proportionate tax and a tax deliberately designed to be a temporary tax . . . [ which] would fall away once there is an international solution”.
The message was underlined by allies of Boris Johnson who said the tax would be reconsidered if an international agreement could be reached at the OECD. One Downing Street insider said the UK prime minister would not be bowing to threats of retribution from Washington: “You can’t have your commercial and tax policy written in the United States.” [...]
The war of words is awkward for the UK which is seeking to conduct parallel trade talks with the EU and the US after Brexit at the end of the month. It soured efforts on both sides to create a positive atmosphere ahead of the talks: the US is the UK’s single largest trading nation, accounting for a fifth of exports.
Mr Javid said on Tuesday that the preference was for a trade deal with the EU first. The bloc is the UK’s largest trading partner, accounting for 45 per cent of UK exports and more than half of the UK’s imports. “Our first priority is getting an agreement with the EU . . . We are leaving in nine days but we still have to do the trade agreement,” he said.[...]
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