US President Donald Trump speaks as Steven Mnuchin, US treasury secretary, watches on day two of the World Economic Forum in Davos, Switzerland, January 22 2020. Picture: BLOOMBERG/SIMON DAWSON
US President Donald Trump speaks as Steven Mnuchin, US treasury secretary, watches on day two of the World Economic Forum in Davos, Switzerland, January 22 2020. Picture: BLOOMBERG/SIMON DAWSON

Davos — On Wednesday, US President Donald Trump, fresh from calling a trade truce with China, threatened to impose crippling tariffs on European vehicles unless the EU budges on a long-delayed deal.

Trump, attending the Davos World Economic Forum (WEF) as his dramatic Senate impeachment trial unfolds back home, revived an offensive against the EU a day after dismissing climate campaigners as “prophets of doom”.

Washington also took aim at European nations that are introducing a digital services tax against US tech giants such as Amazon, Facebook and Google, which stand accused of depriving governments of a fair share of their mammoth cross-border profits.

“The EU is tougher to deal with than anybody. They’ve taken advantage of our country for many years,” Trump told Fox Business News on the sidelines of the WEF. “Ultimately, it will be very easy because if we can’t make a deal, we’ll have to put 25% tariffs on their cars.” 

There was no immediate response from Germany, Europe’s biggest automotive exporter. The price of high-end marques such as BMW and Audi risks spiraling beyond consideration for many American drivers if Trump goes through with the threat. But European Commission president Ursula von der Leyen emerged from a “very good conversation with” the president in Davos talking up the prospects of a deal covering trade, technology and energy.

“We are expecting, in a few weeks, to have an agreement that we can sign together,” she said.

Trump said his attention was turning to Europe after he sealed a ceasefire on trade with China this month. That cooled a destabilising tariff war Trump ignited between the two biggest economies, after he took office vowing also to rewrite a North American accord and overhaul the World Trade Organisation (WTO).

“I wanted to wait till I finished China, to be honest with you. I always like to be very transparent. I wanted to wait till I finished China. I didn’t want to go with China and Europe at the same time,” he said.

‘Arbitrarily putting taxes’

The US and EU agreed to pursue a trade deal in July 2017 as a tentative truce after Trump had taken office and declared a war on America’s yawning trade deficits with the likes of China and Europe.

Europe’s motor industry has remained outside a tit-for-tat tariffs round so far, but US treasury secretary Steven Mnuchin warned this would change if Europeans go through with the digital tax. “If people want to arbitrarily put taxes on our digital companies we will consider putting taxes arbitrarily on car companies,” Mnuchin told a panel in Davos.

France is also planning a digital tax and, in response, Trump has threatened tariffs on French goods including wine

Britain, however, said it would push through with its digital tax while continuing multilateral talks at the Organisation for Economic Co-operation and Development (OECD).

“We plan to go ahead with our digital services tax in April,” said British finance minister Sajid Javid, emphasising that the legislation would “fall away” if there was an international solution. “It is a tax that is deliberately designed as a temporary tax. This year could be the year of change. There is no agreement yet but I think we should all focus on that and reach a deal this year.”

Mnuchin emphasised that the US is still involved in the OECD dialogue, but insisted that a digital tax is “discriminatory in nature”.

France is also planning a digital tax and, in response, Trump has threatened tariffs on French goods including wine. But he agreed with French President Emmanuel Macron in a phone call over the weekend to give more time to talks.

French finance minister Bruno Le Maire told AFP in Davos that the presidents’ conversation had “helped calm things down” and “define a peaceful framework for negotiations”. But he stressed that the major digital companies would pay some kind of tax in France this year: either one agreed at the OECD or a unilateral levy already agreed by the French parliament.

‘Something very dramatic’

Trump has, meanwhile, paralysed the WTO’s dispute settlement process by refusing to name new judges to the Geneva-based body, arguing it is biased against the US.

The EU and others have had to resort to bilateral negotiations to resolve recurrent differences in trade, but Trump said he backed reform of the WTO.

“I’ve had a dispute running with them for quite a while because our country hasn’t been treated fairly,” Trump said, speaking alongside WTO director-general Roberto Azêvedo. “We’re going to do something that I think will be very dramatic.” 

AFP