US backs down from tariffs over French tech giant taxes

Handbags were among the French items valued at $1.3bn in annual trade due for tariffs

America's top trade negotiator said the US would not move forward with tariffs on French goods planned as punishment for new taxes on US tech firms.

The decision comes less than three weeks before US President Donald Trump is due to leave office.

The president has embraced increasing border taxes as part of his trade strategy, but incomer Joe Biden is expected to take a different approach.

This is the second time the US has put off plans for the French tariffs.

The US also agreed to postpone plans for the duties in 2020, after France said it would delay any collection of the new tax on tech giants.

At the time, the two sides said they would work with other countries toward an international agreement about how money made by tech firms should be treated.

Those negotiations, led by the Organisation for Economic Cooperation and Development, have been delayed, but a spokesperson for the multilateral group said it still hoped to "bring about international consensus" later this year.

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In an interview with the BBC last month, US Trade Representative Robert Lighthizer said he agreed "as a general notion" that tech firms should pay tax in markets where they operate and hoped the talks would bear fruit.

"My own view is that we have to come to some kind of global agreement on this issue of how do we tax these large corporations," he said.

On Thursday, the US said it was"indefinitely"suspending its plans for the 25% taxes, which had been due to go into effect on 6 January, on French goods such as handbags and cosmetics, valued at about $1.3bn (£958m) in annual trade.

French eye make-up was due to be hit with tariffs

The office of the US Trade Representative said the decision was due to its wider review of the so-called "digital services" taxes that many countries, including the UK, are moving to impose on tech companies.

"Given that these... investigations are ongoing and have not yet reached any determinations on what, if any, trade action should be taken, the US Trade Representative has determined that it is appropriate to suspend the action in the France DST investigation indefinitely," the department said.

In investigations spanning France, India, Italy and Turkey so far, the department has concluded such measures unfairly target American firms.

Reviews of laws in the UK, European Union, Brazil and other places are still ongoing.