Washington trade officials have proposed the introduction of a 100% tariff on French imports worth $2.4 billion in retaliation for what they have called a barrier to trade in digital services.
Brian Fung reported the news for CNN:
US trade officials proposed a wave of tariffs on French goods Monday as they released a report finding that a new French tax on digital services — affecting large American tech companies such as Facebook (FB) and Google — represents a barrier to trade.
The list of proposed US tariffs covers dozens of products, including cheeses, beauty products, handbags and sparkling wine, including champagne.
Roughly $2.4 billion in French products could be subject to new taxes of up to 100%, the office of the United States Trade Representative said. The public will have until early January to weigh in on the proposal.
The report and proposed tariffs could drive a further wedge between members of the European Union and President Donald Trump, who in July threatened France with “substantial reciprocal action” if it moved forward with its digital services tax.
French Finance Minister Bruno Le Maire on Tuesday said the European Union “would be ready to retaliate strongly” against US sanctions. He told the French radio station Radio Classique that the latest proposal on French products is “unacceptable,” and said he has shared his view with US Trade Representative Robert Lighthizer.
“It is not what one would expect from an ally, it is not what one would expect from the United States,” Le Maire said.
The Financial Times’ James Politi noted:
The plan came at the end of a day marked by escalations in trade tensions between the US and key allies, starting with an announcement that Washington would restore tariffs on metals from Argentina and Brazil to punish them for their currency policies.
In addition, the US trade representative’s office said it was looking at broadening a range of punitive tariffs on EU products, including goods from the UK, France, Spain and Germany, because of subsidies to Airbus, the aircraft maker, that have been judged as illegal by the World Trade Organization.
The new tariffs on French goods follow months of complaints in Washington about the digital services tax introduced by the government of President Emmanuel Macron, which targets companies such as Google, Apple, Amazon and Facebook.
The French tax was levied because of concerns that US technology groups were unfairly avoiding taxes on many digital transactions, and was pitched as a stop-gap measure until new rules could be approved on a multilateral basis through the OECD. Tensions over the digital tax have added to the strains between Donald Trump, the US president, and Mr Macron.
Sudip Kar-Gupta reported for Reuters the French were ready to respond to the threat:
France and the European Union are ready to fight back over the latest U.S. tariff threats on French products, French government ministers said on Tuesday.
French Finance Minister Bruno Le Maire described the U.S. proposals as “unacceptable”. “In case of new American sanctions, the European Union would be ready to riposte,” Le Maire told Radio Classique.
French junior economy minister Agnes Pannier-Runacher told Sud Radio that France would be “pugnacious” in its dealings with the U.S. on the matter, and that France would not back down on its digital tax plans.
France’s 3% levy applies to revenue from digital services earned by companies with more than 25 million euros ($27.86 million) in French revenue and 750 million euros ($830 million) worldwide.
But the U.S. Trade Representative’s office said on Monday that its investigation found that the French tax was “inconsistent with prevailing principles of international tax policy”.
It said it found the French tax proposal “unusually burdensome for affected U.S. companies,” including Alphabet Inc’s Google (GOOGL.O), Facebook Inc (FB.O), Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O).
The latest ruling by the U.S. government knocked down leading French luxury-goods stocks. Shares in LVMH (LVMH.PA), Kering (PRTP.PA) and Hermes (HRMS.PA) fell 1.4% to 1.5% in early trading.
