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France threatens EU retaliation over US plan for tariffs on cheese and Champagne

World News | Published:

The US proposed tariffs on 2.4 billion dollars of goods in retaliation for a French tax on global tech giants including Google, Amazon and Facebook.

Cheese

France has hit back at a US threat to slap 100% tariffs on French cheese, Champagne and other products, with the president telling Donald Trump the move would amount to an attack on all of Europe.

The US Trade Representative proposed the tariffs on 2.4 billion billion (£1.8 billion) of goods in retaliation for a French tax on global tech giants including Google, Amazon and Facebook.

France’s reaction was swift, with President Emmanuel Macron and his finance minister warning of a European riposte if the US measure is implemented.

“We’ll see where the discussions lead in the coming weeks, but it will involve a European response,” Mr Macron said in a meeting with the US president on the sidelines of a Nato summit.

“Because, in effect, it wouldn’t be France that is being sanctioned or attacked but Europe.”

Emmanuel Macron and Donald Trump in London
Emmanuel Macron and Donald Trump in London (Evan Vucci/AP)

Mr Macron said it is “not fair” that digital revenues are taxed less than real-life revenues. He said France should not be singled out for wanting to correct that imbalance with a tax on tech firms.

“My first question is what will happen with the United Kingdom, which adopted the same tax? For Italy, the same tax? Austria, Spain …,” he asked. “If we’re serious, those countries will have to be treated the same way.”

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The US move is likely to increase trade tensions between the US and Europe. Mr Trump said the European Union should “shape up, otherwise things are going to get very tough”.

“I’m not in love with those (tech) companies, but they’re our companies,” he said ahead of his meeting with Mr Macron.

French finance minister Bruno Le Maire said the US tariff threat is “simply unacceptable. It’s not the behaviour we expect from the United States toward one of its main allies”.

He said the French tech tax is aimed at “establishing tax justice”. France wants digital companies to pay their fair share of taxes in countries where they make money instead of using tax havens, and is pushing for an international agreement.

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The problem is pronounced in Europe, where a foreign company can pay most of its taxes in the one EU country where it has its regional base – often a small country like Luxembourg or Ireland that tries to attract multinationals with low corporate taxes.

Mr Le Maire noted that France will reimburse the tax if the US agrees to the international tax plan.

He said France talked this week with the European Commission about EU-wide retaliatory measures if Washington follows through with the tariffs next month.

EU Commission spokesman Daniel Rosario said the EU will seek “immediate discussions with the US on how to solve this issue amicably”.

The US tariffs could double the price American consumers pay for French imports and would come on top of a 25% tax on French wine imposed last month in a separate dispute over subsidies to Airbus and Boeing.

French cheese producers expressed concern that the threatened new tariffs would hit small businesses hardest. It would also further squeeze exporters hit by a Russian embargo on European foods.

The Office of the US Trade Representative charges that France’s new digital services tax discriminates against US companies.

Mr Le Maire disputes that, saying it targets European and Chinese businesses too. The tax imposes a 3% annual levy on French revenues of any digital company with yearly global sales worth more than 750 million euros (£640 million) and French revenue exceeding 25 million euros (£21 million).

“What we want is a plan for international tax that is on the table” at the Organisation for Economic Cooperation and Development, Mr Le Maire said.

The US investigated the French tax under Section 301 of the Trade Act of 1974 — the same provision the Trump administration used last year to probe China’s technology policies, leading to tariffs on more than 360 billion dollars of Chinese imports in the biggest trade war since the 1930s.

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