Donald Trump plans to hit France with $2.4 billion tariffs in retaliation for ‘digital tax’

The United States on Monday threatened to impose tariffs of up to 100 percent on $2.4 billion in French goods in retaliation for a digital services tax it says is discriminatory.

French sparkling wine, yogurt and Roquefort cheese are on the list of goods that could be targeted as soon as mid-January after a report from the US Trade Representative’s office found the tax penalizes American tech companies such as Google, Apple, Facebook and Amazon.

The decision ‘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,’ US Trade Representative Robert Lighthizer said in a statement.

Lighthizer also warned that Washington was considering widening the investigation to look into similar taxes in Austria, Italy, and Turkey.

‘The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies, whether through digital services taxes or other efforts that target leading US digital services companies.’

Hitting the French: Donald Trump touched down with his wife Melania for the NATO summit in London just before the announcement his administration wants to hit France with $2.4 billion in tariffs – with a meeting with Emmanuel Macron scheduled for Tuesday morning

Silicon Valley target: Emmanual Macron's government is acting over concern in his country that internet giants such as Mark Zuckerberg's Facebook are not paying their fair share of tax

Silicon Valley target: Emmanual Macron's government is acting over concern in his country that internet giants such as Mark Zuckerberg's Facebook are not paying their fair share of tax

Silicon Valley target: Emmanual Macron’s government is acting over concern in his country that internet giants such as Mark Zuckerberg’s Facebook are not paying their fair share of tax

The announcement comes hours before President Donald Trump is due to meet his French counterpart Emmanuel Macron on the sidelines of the NATO summit in London on Tuesday.

The French tax, enacted earlier this year, imposes a three percent levy on the revenues earned by technology firms in France, which often come from online advertising and other digital services.

The tax affects companies with least 750 million euros ($830 million) in annual global revenue on their digital activities.

The French tax targets revenue instead of profits, which are often reported by tech giants in low-tax jurisdictions like Ireland in a practice that has enraged governments.

The USTR report ‘concluded that France’s Digital Services Tax (DST) discriminates against US companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies.’

After the tax was enacted, Trump in July vowed ‘substantial’ retaliation for the French measure.

USTR has scheduled public hearings on the proposal to imposes ‘duties of up to 100 percent on certain French products,’ and the possibility of ‘imposing fees or restrictions on French services.’

The last date to submit comments on the proposed actions is January 14, and ‘USTR expects to proceed expeditiously thereafter.’

The list of French products subject to potential duties includes cosmetics, porcelain, soap, handbags, butter, and several kinds of cheeses, including Roquefort and Gruyere.

However, despite Trump’s repeated threats to retaliate against French wines, only sparkling wine made the tariff list.

Blue cheese hit: Roquefort, a blue cheese made from sheep's milk is among the targets of Trump's tariffs

Blue cheese hit: Roquefort, a blue cheese made from sheep’s milk is among the targets of Trump’s tariffs

Also included would be French blue cheese such as Roquefort and Saint Agur; French-made gruyere; lipstick and other make-ups; handbags – which would include luxury brands such as Chanel and Louis Vuitton; and cast iron kitchen ware, which includes high-end brands such as Le Creuset and Staub. 

Efforts to find a global solution to the dispute over digital taxes have so far not been successful.

Last month, G20 ministers meeting in Washington opened talks on an international system to tax global tech giants that the Organization for Economic Cooperation and Development hopes would take effect by June.

Public outrage has grown over the practice of profit shifting, which critics say deprives governments of their fair share of tax revenue.

Trump’s use of tariffs had hit stock markets Monday, with a move to impose tariffs on Brazil and Argentina raising fears there will not be an end to trade tensions with China. 

Wall Street has been hoping that the world’s two biggest economies can make progress toward at least stalling new tariffs scheduled for Dec. 15 on $160 billion worth of Chinese products, including smartphones and laptops. The latest friction between Washington and Beijing could hamper that progress.

“The market is getting increasingly anxious that it’s possible, perhaps not likely, that the tariffs are imposed on Dec. 15, thus escalating the tariff trade war,” said Quincy Krosby, chief market strategist at Prudential Financial.

The S&P 500 index fell 27.11 points, or 0.9%, to 3,113.87. The Dow Jones Industrial Average dropped 268.37 points, or 1%, to 27,783.04.

 

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