PARIS — Presidents Emmanuel Macron and Donald Trump have agreed to extend negotiations on a dispute over a French tax on digital giants to the end of the year, postponing Washington's threat of sanctions against Paris, a French diplomatic source said on Monday.

The source said the French and US leaders, who spoke on Sunday, had agreed to give negotiations a chance to "find a solution in an international framework" and avoid "a trade war that will benefit no one".

Macron tweeted earlier on Monday that he had had a "great discussion" with Trump on the issue.

"We will work together on a good agreement to avoid tariff escalation," he said.

The White House said the two men spoke and "agreed it is important to complete successful negotiations on the digital services tax, and they also discussed other bilateral issues."

The dispute began last year when Paris approved a levy on up to 3 per cent of revenues earned by technology companies in France, as international efforts dragged on to find a new model for taxing revenues earned via online sales and advertising.

Tech companies often pay little tax in countries in which they are not physically present.

Washington said the tax singled out US companies such as Google, Apple, Facebook, Amazon and Netflix, and threatened duties of up to 100 per cent of the value of French imports of such emblematic goods as Champagne and Camembert cheese.

On January 7, the two sides gave themselves 15 days to reach a deal to avert the US threat of duties on up to $2.4 billion of French goods.

French Finance Minister Bruno Le Maire, who has been conducting intensive negotiations for the last several weeks, was less sanguine than Macron, describing the talks as "very difficult" earlier on Monday.

Avoiding sanctions that could be announced as soon as on Wednesday is "far from assured", he told French television LCI.

Le Maire is due to meet US Treasury Secretary Steven Mnuchin at the World Economic Forum meeting in Davos on Wednesday.

They are expected to continue talks seeking a negotiated agreement in the Organisation for Economic Cooperation and Development (OECD).

"France is pursuing its objective of fair taxation on digital companies and finding a compromise within the framework of the OECD," the French presidency said on Monday.

France has said it would drop its tax if an international agreement is reached.

After blocking the OECD talks for several years, Washington relaunched them last year only to make proposals in December which France rejected. — AFP