United States to impose tariffs on French products in response to technology tax

WASHINGTON – The Trump government said on Friday it would impose new tariffs on $ 1.3 billion worth of French products, including cosmetics, soaps and bags, in retaliation for a French tax that heavily affects American tech companies, which intensifies a trade dispute that threatens to cause further damage. The global economy.

Notably absent from the tariff list, released by the United States Trade Representative, are French cheese, sparkling wine, and cookware, which the administration had threatened to tax in December. Wine retailers and other American importers of French products voiced opposition to those potential tariffs, saying they would harm American companies and their workers.

The 25 percent tariffs will be delayed 180 days and take effect in January 2021, a pause meant to give both countries time to resolve their differences over a digital tax that will affect American tech companies.

France has adopted a 3 percent tax on the income that some companies earn by providing goods and services to French users via the Internet, even if they don’t have large physical presences in France, a move that will target Facebook, Google, Amazon and others whose companies focus on digital advertising and e-commerce.

The Trump administration launched a business investigation into the tax a year ago. The report found in December that the French tax “discriminates against US companies, is inconsistent with current principles of international tax policy, and is unusually burdensome for affected US companies.” The report recommended tariffs of up to 100 percent on certain French imports valued at $ 2.4 billion, including cheese, wine, and bags. The final recommendation was significantly less punitive, with tariffs of 25 percent, and wine and cheese were removed from the list entirely.

American and French officials called for a temporary truce on the issue in January, with the French pledging to suspend tax collection and the Americans pledging to delay tariffs, while international negotiators sought a multilateral agreement on where and how to tax Internet trade that borders are crossed

But that detente has collapsed in recent months, with Treasury Secretary Steven Mnuchin suspending international tax negotiations and warning of retaliation against any country that imposes new taxes on American tech companies like Amazon, Facebook, and Google.

While the United States initially agreed to work with its global counterparts to create a unified tax system, other countries have opposed the Trump administration’s push for a provision that effectively allows some American companies to choose whether to abide by any new system created by a global agreement.

And a growing list of governments has considered its own digital taxes as tax revenues fall during the pandemic recession. Several European countries, led by France, have been implementing taxes on digital services, which would largely fall on American internet companies. Italy, Spain, Austria and Britain have announced plans to impose taxes on digital services, which impose tariffs on online activity that takes place in those countries, regardless of whether the company has a physical presence.

In June, the administration launched trade investigations, similar to France’s tax, against tax proposals in nine countries and the European Union.

The decision to go ahead with the tariffs on France could revive a trade war between the United States and Europe. President Trump has already imposed tariffs on foreign steel and aluminum, leading the European Union to retaliate with its own taxes on American products. The two governments also disagree over subsidies for domestic aircraft, and the Trump administration annually taxes up to $ 7.5 billion of European exports as punishment for unfair subsidies awarded to Airbus.