Presidents Emmanuel Macron and Donald Trump of France and the U.S., respectively, have agreed to avoid any tariff escalation and prevent a trade war. This truce in their dispute over digital taxes indicates that neither country will impose tariffs on each other this year.

A White House readout of the conversation stated that the “two leaders agreed it is important to complete successful negotiations on the digital services tax,” according to Bloomberg.

Neither a White House spokesman nor any officials in the U.S. Trade Representative’s office could confirm President Trump’s termination of his announced tariffs.

The European Union (EU) is an even larger trading partner than China, especially in the automotive and financial services industries. Transatlantic tensions building between Washington and Brussels could result in another front opening in the trade war. In an effort to balance trade between China and the U.S. to focus efforts on the EU, President Trump signed a cease-fire in the current tariff war with China.

The Organization for Economic Cooperation and Development (OECD) is working on a proposal for taxing tech companies around the world. Although Macron’s government hopes to find a solution that fits the proposal, France issued its own tariff last year that greatly affected U.S. multi-billion dollar industries such as Google, Apple, and Amazon.

French officials report that Paris and Washington have discussed the chance of France not collecting digital tax payments on the condition that the U.S. does not impose any new tariffs. The French government will not in effect withdraw the levy though, because it doesn’t find its national tax discriminatory. Additionally, France warns of retaliation if the U.S. imposes further tariffs.

While citing Section 301 of a 1974 American law, the U.S. claimed that the French Tax discriminates against American technology companies. This same law is reserved and has been used by President Trump to justify tariffs against China. Likewise, this law also leads the U.S. to threaten French goods with billions of dollars in tariffs. Luxury items like French wine, cheese, and makeup were targeted.

As the European Commission changed its executive leadership, Phil Hogan, the EU trade commissioner, took his first visit to Washington in hopes of addressing the tax disagreements with talks instead of tariffs.

“At stake is transatlantic trade in goods and services valued at more than $3 billion a day,” said Hogan, “So why put tariffs on these EU products to make them more expensive for your people?”

President Trump argued that the rule-based system for global trade is outdated and puts America at a major disadvantage.

This dispute has world-wide consequences as other countries attempt to produce ways to generate revenue from the digital economy. Treasury Secretary Steven Mnuchin warned that the United Kingdom and Italy will face American tariffs if they proceed with their own on foreign technology companies.

Trade relations between the U.S. and the EU began declining when the Trump administration imposed tariffs on European steel and aluminum in 2018. This infuriated the EU as they retaliated with their own levies on iconic American companies like Harley-Davidson and Levi Strauss.

The U.S. then threatened to target the European auto industry with heavy taxes. This led to a truce and a pledge by both sides to strive to reduce tariffs across the board. But since then, the U.S. has refused to start negotiations unless Europe includes agriculture.

President Trump has voiced his frustrations with Europe as a trading partner.

“Europe has had tremendous barriers to us doing business with them. All those barriers are coming down,” said President Trump, according to Bloomberg. “They have to come down. If they don’t come down, we’re going to have to do things that are very bad for them.”

There is now an agreement between France and the U.S. to avoid any tariff escalation and to keep economic stability, but it remains an extremely difficult negotiation. There are still many details that need to be resolved.

Photo has been removed due to copyright infringement.