France’s government said the European Union (EU) would retaliate if the US follows through on a threat to hit about $2.4 billion of French products with tariffs over a dispute concerning how large tech companies are taxed.
“It’s not worthy of an ally, and it’s not the behaviour we expect from the US towards one of its main allies, France, and more generally, Europe,” French
Finance Minister Bruno Le Maire said on Radio Classique. “If there were new US sanctions, the EU would be ready to retaliate.”
The office of the US Trade Representative (USTR) said that France’s digital services tax — a levy that hits the revenues of large American tech companies including Google, Apple Inc, Facebook Inc and Amazon.com Inc — “discriminates against US companies.” The American tariffs would be imposed after a public comment period concludes in early 2020 and could target sparkling wine, cheeses, handbags and makeup.
USTR Robert Lighthizer said the agency is also exploring whether to open investigations into similar digital taxes by Austria and Italy. The move comes hours after president Donald Trump announced a barrage of other tariffs on steel and aluminum from Argentina and Brazil.
“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies,” Lighthizer said in a statement. “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies.”
The report concludes a more than four-month-long probe, known as a Section 301 investigation, into France’s tax regime, which Lighthizer in July said “unfairly targets American companies.” The same law was used last year to examine China’s intellectual property practices that led to tariffs on more than $360 billion in Chinese goods.
LVMH, the maker of Louis Vuitton handbags and Moet & Chandon champagne, fell as much as 1.8% in Paris trading, while makeup company L’Oreal SA lost as much as 1.4% and leather-goods maker Hermes International declined 2.1%.
Trump in August suggested tariffs of and told aides that while he’s not generally empathetic with US tech companies, he believes it should be the US — not any other country — that taxes them, people familiar with internal deliberations said.
The US move is a setback for efforts to stop a conflict over digital tax from intensifying. Trump and France’s Emmanuel Macron agreed in August to try to find a compromise, but a 90-day deadline for talks expired last week without a resolution.
The US tariffs and the French tax are likely to be a priority during a meeting between Trump and Macron, on the sidelines of a NATO conference in London.
“The French national tax on digital activities just aims to re-establish fiscal fairness,” Le Maire said. “It targets American companies, it also targets Chinese and European companies, so it is not discriminatory.”
France won’t retreat over digital tax: Junior minister
France must remain strong on its digital tax despite US threats to impose tariffs on roughly $2.4 billion in French products, Junior Economy Minister Agnes Pannier-Runacher said.
She noted that the OECD has come up with a digital tax plan for countries to examine and that the US had said it would try to resolve the issue through that forum.
“Now the US are panicking and back-pedaling a bit and saying ‘we’re going to apply pressure’,” Pannier-Runacher told Sud Radio in an interview. “It’s very clear that we don’t have to retreat over a subject that makes sense economically and which is fiscally just.”