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France vows EU retaliation against Trump digital tax plans

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Via Financial Times

Paris has hit back at the Trump administration’s threat to impose 100 per cent tariffs on up to $2.4bn of French goods with France’s finance minister vowing the EU was ready to retaliate with “a strong riposte”.

Bruno Le Maire called the tariff plans “unacceptable” and not worthy of an ally. “It’s in no one’s interest, it’s not in the interest of growth, or of political stability,” he said in a radio interview.

Washington threatened on Monday to impose the tariffs on French goods, including champagne and luxury items, after the US trade representative’s office concluded that a French digital services tax unfairly discriminates against American technology companies.

The move came amid an escalation in trade tensions between the US and key allies. Washington also said on Monday it might broaden its punitive tariffs on other EU products — including from the UK, France, Spain and Germany — because of subsidies to European aircraft maker Airbus that have been deemed illegal by the World Trade Organization.

The US also said it would restore tariffs on metals from Argentina and Brazil to punish them for their currency policies.

The tensions triggered heavy falls in Asian stocks on fears over the prospects for global trade. After Wall Street shares slid overnight, Australia’s S&P/ASX 200 dropped 2.2 per cent while Hong Kong’s Hang Seng index slid as much as 1.4 per cent. European stocks were a little higher after Monday falls, with the FTSE Eurofirst 300 index up 0.3 per cent.

The new tariffs on French goods follow months of complaints in Washington about the digital services tax introduced by the government of President Emmanuel Macron, which targets companies such as Google, Apple, Amazon and Facebook.

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France insists its digital tax, designed to ensure that tech companies pay a reasonable level of tax in the countries where they do business rather than shifting the profits to tax havens, is aimed at companies from all countries, including China. It was pitched as a stop-gap measure until new rules could be approved on a multilateral basis through the OECD.

Mr Le Maire asked whether the US was still committed to reaching an agreement at the OECD for a global minimum tax.

The OECD negotiations are under way and due to be concluded next year. Mr Le Maire had announced at the G7 summit in Biarritz in August that the US and France had reached a compromise on how to treat France’s national turnover tax on big tech groups.

According to Mr Le Maire, he and US Treasury secretary Steven Mnuchin agreed that the French tax would stay in place for two years but companies would receive tax credits for those years if the international tax rate agreed at the OECD resulted in a lower level of taxation.

Agnès Pannier-Runacher, French junior finance minister, said France would not back down on its digital tax and needed to be “pugnacious” in defending it.

Sparkling wines had been left off the list of tariffs imposed in the tussle over subsidies to Airbus but are a target in the digital tax dispute with France, along with handbags, porcelain, cheeses, yoghurt and other French products. As well as threatening levies on the new categories of imports, the US administration said it would consider whether to impose “fees or restrictions” on French services.

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The USTR also warned that other countries that have introduced digital services taxes, including Italy, Austria and Turkey, could face a similar investigation.

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