US Threatens 100% Tariffs On $2.4 Billion In French Goods Including Champagne Over Digital Tax

The Trump administration has threatened to impose 100% tariffs on up to $2.4 billion of French imports, including champagne, after concluding that the country’s tax on digital revenues that hits large American tech companies including Google, Apple, Facebook and Amazon.com unfairly discriminated against US tech companies.

The plan was announced by the US trade representative, Robert Lighthizer, on Monday at the conclusion of an investigation into the French digital services tax, which has pitted Donald Trump against Emmanuel Macron, the French president, for months. The action is designed to pressure France to reach a new agreement on taxing digital services that doesn’t disadvantage American companies according to the WSJ. Under the process outlined by the USTR, the tariffs wouldn’t take effect until January at the earliest, giving the two sides a window to continue negotiations.

“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 U.S. companies,” Lighthizer said in a statement. “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”

The USTR also said that the French tax “discriminates against U.S. digital companies, such as Google, Apple, Facebook and Amazon. ”

The USTR also threatened that such tariffs could be enacted against Austria, Italy and Turkey, all of which also have digital-services taxes. The tariff action against France uses the same broad law that the U.S. has used to impose tariffs against China.

France’s digital-tax measure is the first in a series of proposed national taxes on digital services being debated across Europe.

As a reminder, French lawmakers approved the new tax in July, just hours after Lighthizer said his office would investigate the tax. The French tax, which is retroactive to the beginning of 2019, applies a 3% tax on revenue that companies reap in France from such activities as undertaking targeted advertising or running a digital marketplace.

Meanwhile, on Monday French Finance Minister Bruno Le Maire said that after asking for an international solution at the OECD level, the U.S. was backtracking. “They are now telling us that they don’t want this solution and are simply going to impose new sanctions on France,” Mr. Le Maire said, speaking on the radio. “My message is clear: We will never, never, never abandon our will to tax fairly tech giants.”

The USTR said it would hold public hearings on January 7 of 2020 and wait to receive public comments through at least January 14, giving France and the other members of the OECD more time to negotiate.