On Monday the U.S. President Trump said that new French tax hit American technology companies. He said France’s move was against the U.S. – a declaration that could lead to retaliatory tariffs as high as 100% on French wines.
The retaliation could also jeopardize international efforts to negotiate a truce on so-called digital taxes.
France taxes affect U.S. companies such as Facebook, Amazon, and Google, even though they have little physical presence in France.
The U.S. recommended tariffs as high as 100% on certain French imports valued at $2.4 billion, including handbags and cheese.
Bruno Le Maire, France’s economy and finance minister, denounced the threat as “unacceptable,” saying Europe would come ahead with a “strong response.”. He did not elaborate on the retaliatory measures.
“This is not the sort of behavior we expect from the United States toward one of its main allies, France, and toward Europe in general,” Mr. Le Maire said an interview with Radio Classique.
US-France trade tensions to complicate any negotiations on digital taxes
The U.S. had already hit France with 25% tariffs in October in a separate dispute but allowed the President to impose them if and when he wished.
It could also turn upside down efforts by the Organization for Economic Cooperation and Development to unite the 135 countries around a shared system of taxing technology. Leaders had hoped would come together in 2020.
An escalation of the US-France trade tensions would complicate any resolution to the negotiations.
The French government approved a new “digital service tax” this year on online economic activity. The tax would hit sizeable American tech companies widely frequented by French citizens.
French leaders have expressed concern that their government has not been able to capture revenue from companies that sell or advertise online in France. This concern is shared by a growing number of countries, including Britain and India.
Trump’s trade representative responded to the French tax by opening the investigation into whether it unfairly targeted American companies.
In July, the President threatened to impose tariffs on French wine as a response to the new tax.