The US Treasury secretary Steve Mnuchin has warned the UK of reprisals in the form of taxes on car companies if the government forges ahead with plans for its digital services tax.

During a panel discussion in Davos, Mnuchin said he was hoping to hold “private conversations” with UK counterpart Sajid Javid and the UK Prime Minister Boris Johnson about the proposed tax, which is due to come into force this April.

He went onto to describe it as “discriminatory in nature”, adding: “If people want to just arbitrarily put taxes on our digital companies, we will consider putting taxes arbitrarily on their car companies.”

But Javid stuck to his guns.

“We plan to go ahead with out digital services tax,” he told the Davos audience. “It is a proportionate tax, it is deliberately designed as a temporary tax – it will fall away once there is an international solution,” the chancellor explained.

As things stand, the UK’s draft legislation would tax companies at two per cent of revenues from UK users for companies that have more than £500m in digital revenues worldwide and over £25m from UK activities.

He highlighted “a growing disconnect between where customers are based” and where profits are booked by firms.

“This does require an international solution that we agree on – that is why all the big economies… are part of this discussion,” he said.

“This could be the year of change,” he adds. “This could be the year of agreement.”

The pair crossed swords at a critical time in the UK-US relationship, as the two sides prepare to enter formal trade talks.

This morning, City A.M. revealed Johnson’s team is “pretty much set”, with negotiating priorities in the process of being signed off by Cabinet. Johnson himself will fly to Washington to kick-start talks, in the hope of leveraging the “good will” that exists between him and US President Donald Trump.

Mnuchin said he expects a trade deal with the UK this year, saying he was “disappointed” by Javid’s comments during the session that Downing Street’s “first priority will be getting the agreement with the EU.”

Former chancellor George Osborne warned his successor against entering into a trade war with the US over taxing tech firms.

“It would certainly be a very brave British government that walks into a trade war with the United States at the very moment as the centre point of its economic policy is to strike a trade deal with the US,” he told the BBC this morning. “I suspect they will use what the OECD is saying as a reason to delay implementation.”

The OECD has recommended the UK “hold fire” for a multilateral solution.