Philip Hammond has criticised Donald Trump over the US president’s new tax reforms, which could break international rules.

The Chancellor joined with other European finance ministers to urge Steven Mnuchin, the US Treasury Secretary, to rethink the proposed changes.

In a letter addressed to Mr Mnuchin, the finance ministers of the UK, Germany, France, Italy and Spain warned that the tax reform promised by Mr Trump could risk ‘seriously hampering genuine trade and investment flows’.

Donald Trump's tax reforms have been criticised in a letter by European finance ministers including Philip Hammond. It has also been suggested they could break international rules

The ministers warned the measures could ‘discriminate’ in a manner which would contravene World Trade Organisation (WTO) provisions, would be inconsistent with double taxation rules, and would be ‘poorly targeted’ at helping to combat tax avoidance.

‘The inclusion of certain less conventional international tax provisions could contravene the US’s double taxation treaties and may risk having a major distortive impact on international trade,’ the letter stated.

One of Mr Trump’s proposals provides for a 20 per cent excise tax on payments to foreign affiliated companies, which ‘would impact on genuine commercial arrangements’.

Because it would only apply where payments are being made for foreign goods and services, this would discriminate and break WTO rules. The plans have not yet been passed by the US Congress.