On Tuesday, France and the European Union said they are ready to retaliate if President Trump acts on a threat to impose duties of up to 100% on imports of champagne, handbags and other French products worth $2.4 billion.
The threat of punitive tariffs came after a U.S. government investigation found France’s new digital services tax would harm U.S. technology companies, and will intensify a festering trade dispute between Europe and the United States.
“They’re starting to tax other people’s products so therefore, we go and tax them,” Trump said in London on Tuesday ahead of a NATO alliance summit. He had earlier said he would not allow France to take advantage of American companies and that the European Union treated the United States very unfairly on trade.
The European Commission said the 28-nation EU would act as one and that the best place to settle disputes was at the World Trade Organization. The United States has already imposed 25% duties on French wine and cheese as part of its WTO-sanctioned response to illegal EU aircraft subsidies, a move exporters warned would penalize U.S. consumers while severely hurting French producers.
France’s 3% levy applies to revenue from digital services earned by companies with more than 25 million euros ($27.86 million) of revenues from France and 750 million euros ($830 million) worldwide. An investigation by the U.S. Trade Representative’s office found the French tax was “inconsistent with prevailing principles of international tax policy”. It said the tax was “unusually burdensome” for U.S. companies including Alphabet Inc’s Google, Facebook Inc, Apple Inc, and Amazon.com Inc.
MacDailyNews Take: Again, as we wrote back in April:
As per the EU itself, the smart approach for Apple et al. is to lobby for harmonized EU taxation over a state-by-state patchwork of taxes, as that will at least offer simplicity, stability, and predictability.