Via Financial Times

The Trump administration on Monday proposed the imposition of 100 per cent tariffs on up to $2.4bn of French goods, including champagne, after concluding that the country’s digital services tax unfairly discriminated against American technology companies.

The plan came at the end of a day marked by escalations in trade tensions between the US and key allies, starting with an announcement that Washington would restore tariffs on metals from Argentina and Brazil to punish them for their currency policies.

In addition, the US trade representative’s office said it was looking at broadening a range of punitive tariffs on EU products, including goods from the UK, France, Spain and Germany, because of subsidies to Airbus, the aircraft maker, that have been judged as illegal by the World Trade Organization.

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.

The French tax was levied because of concerns that US technology groups were unfairly avoiding taxes on many digital transactions, and was pitched as a stop-gap measure until new rules could be approved on a multilateral basis through the OECD. Tensions over the digital tax have added to the strains between Donald Trump, the US president, and Mr Macron.

At the G20 summit in Biarritz in August, the US had offered French officials a three-month reprieve from any action, but that has since run out. 

“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 US companies,” said Robert Lighthizer, the US trade representative.

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“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,” he added.

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

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.

The new tariffs will not be imposed until after a public comment period that includes a hearing in Washington on January 7, where producers and consumers of the affected goods can argue against them. 


Value of Chinese imports to the US that face tariffs if a trade deal is not reached by December 15

The US technology sector welcomed the Trump administration’s move but said it still hoped that a settlement could be reached through the OECD. 

“USTR recognised the discriminatory aspects of France’s digital services tax and intends to prepare a strong trade response should the measure remain in place. We hope to avoid this outcome,” said Jennifer McCloskey, vice-president for policy at the Information Technology Industry Council, whose members include the top US technology companies.

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USTR’s criticism of France’s digital tax also earned bipartisan backing from Chuck Grassley, an Iowa Republican, and Ron Wyden, an Oregon Democrat, the two leading senators on the finance committee of the upper chamber of Congress.

“The French digital services tax is unreasonable, protectionist and discriminatory,”they said in a joint statement.“Taking premature action that will adversely and disproportionately affect another OECD member state is contrary to the organisation’s goals and shouldn’t stand.”

A spokeswoman for the French embassy in Washington declined to comment.

Combined with weak data on manufacturing activity in the US on Monday, Mr Trump’s return to an aggressive stance on trade spooked investors, leading to a fall in equity indices.

The move to slap tariffs on steel and aluminium from Brazil and Argentina, which Mr Trump had exempted from the levies last year, came after a rise in the US dollar and also after agricultural producers from those countries increased sales to China, outflanking US farmers.

The US is struggling to reach a much-vaunted interim deal to pause its trade war with Beijing, and if no agreement is reached by December 15, it could move to impose 15 per cent levies on a further $156bn of Chinese products, including many consumer goods.