Boris Johnson has warned Donald Trump that both their countries will suffer if the US starts a trade war in the increasingly bitter dispute over the UK’s “tech tax”.

The prime minister hit back after Washington threatened retaliation – probably a tax on UK car exports to the US – when a two per cent levy on the likes of Google and Facebook is imposed in April.

No 10 not only insisted the digital services would go ahead, but declined to rule out tit-for-tat measures – despite the desire for a rapid post-Brexit deal meant to lower trade barriers.

In fact, because the UK will be locked into a standstill transition period until the end of 2020 – with no direct say over EU decisions – any counter-measures would probably have to come from Brussels.

The row was inflamed when Steven Mnuchin, the US Treasury secretary, told an event in Davos: “If people want to just arbitrarily put taxes on our digital companies we will consider arbitrarily putting taxes on car companies.”

Davos 2020 - in pictures Show all 14 1 /14 Davos 2020 - in pictures Davos 2020 - in pictures U.S. President Donald Trump walks out of the Marine One helicopter as he arrives for the 50th World Economic Forum (WEF) in Davos, Switzerland, January 21, 2020 REUTERS Davos 2020 - in pictures Spotters gather on a viewpoint to take pictures of Air Force One (not pictured), carrying US President Donald J. Donald Trump, as it lands at Zurich Airport, Switzerland, 21 January 2020. Trump arrived in Switzerland to attend the 50th annual meeting of the World Economic Forum (WEF) in Davos EPA Davos 2020 - in pictures U.S. President Donald Trump waves as he arrives for the 50th World Economic Forum (WEF) in Davos, Switzerland, January 21, 2020 REUTERS Davos 2020 - in pictures A Secret Service agent takes a photo as the Marine One helicopter carrying U.S. President Donald Trump flies nearby en route to the Word Economic Forum in Davos, Switzerland January 21, 2020 REUTERS Davos 2020 - in pictures US President Donald J. Trump smiles before addressing a plenary session during the 50th annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, 21 January 2020. The meeting brings together entrepreneurs, scientists, corporate and political leaders in Davos under the topic 'Stakeholders for a Cohesive and Sustainable World' from 21 to 24 January 2020 EPA Davos 2020 - in pictures Ivanka Trump, special adviser to the president and senior advisor Jared Kushner listen as U.S. President Donald Trump delivers a speech during the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 21, 2020 REUTERS Davos 2020 - in pictures Artists from Fete des Vignerons perform a song "Ranz des Vaches" before U.S. President Donald Trump's speech during the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 21, 2020 REUTERS Davos 2020 - in pictures US President Donald J. Trump (R, red tie) walks in the Congress Centre after addressing a plenary session during the 50th annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, 21 January 2020. The meeting brings together entrepreneurs, scientists, corporate and political leaders in Davos under the topic 'Stakeholders for a Cohesive and Sustainable World' from 21 to 24 January 2020 EPA Davos 2020 - in pictures Swedish climate activist Greta Thunberg addresses a panel session during the 50th annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, 21 January 2020. The meeting brings together entrepreneurs, scientists, corporate and political leaders in Davos under the topic 'Stakeholders for a Cohesive and Sustainable World' from 21 to 24 January 2020 EPA Davos 2020 - in pictures Swedish environmental activist Greta Thunberg (C) listens to a speech by US President Donald J. Trump at a plenary session during the 50th annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, 21 January 2020. The meeting brings together entrepreneurs, scientists, corporate and political leaders in Davos under the topic 'Stakeholders for a Cohesive and Sustainable World' from 21 to 24 January 2020 EPA Davos 2020 - in pictures U.S. President Donald Trump speaks dutring a bilateral meeting with European Commission President Ursula von der Leyen during the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 21, 2020 REUTERS Davos 2020 - in pictures Demonstration organized by Juso Schweiz (Young Socialist Party) on the sideline of the 50th annual meeting of the World Economic Forum, WEF, in Davos, Switzerland, 21 January 2020. The meeting brings together enterpreneurs, scientists, chief executive and political leaders in Davos January 21 to 24 EPA Davos 2020 - in pictures Governor of the Bank of England Mark Carney attends a session at the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 21, 202 Reuters Davos 2020 - in pictures U.S. President Donald Trump shakes hands with the President of the Swiss Confederation Simonetta Sommaruga during a bilateral meeting at the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland REUTERS

In response, Mr Johnson’s spokesperson said: “Imposing additional tariffs would harm businesses and consumers on both sides of the Atlantic.”

And, asked if the UK would seek to impose its own further tariffs, he said only: “Let’s focus on the here and now.”

The threatened trade war has come at the worst time for Downing Street, as it seeks to fast-track an agreement to boost transatlantic trade – the supposed prize of leaving the EU at the end of the month.

Instead, Mr Mnuchin said the US president would lobby the prime minister over the proposed tax, which he described as “discriminatory”.

The UK is determined to plough ahead, believing the massive tax avoidance by the US tech giants “undermines public trust” in the fairness of the tax system.

Speaking alongside Mr Mnuchin in the Swiss city, the chancellor Sajid Javid said: “We plan to go ahead with our digital services tax in April.”

The message was underlined by the prime minister’s spokesperson, who insisted it was necessary but would only remain in place until there was an international agreement.

“We are fully engaged in international discussions to address the challenges digitalisation poses for tax,” he said.

“Our strong reference is for an appropriate global solution. It has taken too long to address this issue at international level and so we will continue to introduce our digital services tax in April in the absence of a global solution.”

However, should Mr Trump win re-election in November, the prospects for an international agreement on how to tax the tech giants would diminish further.

France had appeared ready to drop its own plan for a 3 per cent levy on the largest firms, after Washington vowed to put taxes on French imports including wine.