US could introduce new trade tariffs on French products over digital taxes

After coming to the conclusion that France’s new digital services tax could be harmful to US tech companies, the government just announced that it may be implementing its own taxes on French products, such as Champagne, cheese, handbags and a number of other products.

France currently applies 3% levies to revenue from digital services once companies earn over €25 million in French revenue and €750 million worldwide. However, this has long been disputed by the US government, who say US companies are disproportionately affected.

Under its “Section 301” investigation, the US Trade Representative said that the digital services tax was inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies.”

The new tax could affect giants like Google, Facebook, Amazon, and Apple, and because of this, there are plans to put duties of up to 100% of around $2.4 billion of imports from France.

The list of products excluded some of those originally excluded from the 25% tariffs that were imposed previously. This includes products like sparkling wines, make-up, handbags – it’s thought that  French luxury goods giant LVMH and cosmetics maker L’Oréal  would be hit hard by this.

In addition, US Trade Representative, Robert Lighthizer, said the government was considering similar measures on other EU countries with digital taxes, including Turkey, Austria, and Italy. However, it didn’t mention taxes in the UK or Canada.

“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies,” Lighthizer said.

In 2018, the EU tried to secure exemption from US trade tariffs, which included a hike in tariffs on steel and aluminium imports. There are fears this could lead to a trade war, with Europe introducing its own retaliatory tariffs on US products.

When talking about the latest changes in a joint statement Senators Charles Grassley and Ron Wyden, the top Republican and Democrat, said: “The French digital services tax is unreasonable, protectionist and discriminatory.”

So far, a date hasn’t been specified for when the new tax would be effective.