U.S. threatens 100pc tariffs on French goods over digital tax 'discrimination'

French champagne

French products including wine and cheese could face 100 percent tariffs as the USA confronts France over its taxes on American tech companies.

The Office of the U.S. Trade Representative charged Monday that France's new digital services tax discriminates against U.S. companies.

Shares in French luxury companies fell in response to the tariff threat against French champagne, handbags, cheeses and other products.

The trade agency said it would collect public comments on its proposed tariff list through January 14 and hold a public hearing on January 7.

The USTR's report and proposed tariff list follow months of negotiations between French Finance Minister Bruno Le Maire and U.S. Treasury Secretary Steven Mnuchin over a global overhaul of digital tax rules.

Meanwhile, President Trump also said on Monday that the US will restore tariffs on steel from Brazil and Argentina.

Lighthizer warned that the U.S.is also exploring whether to pursue Section 301 investigations into digital taxes introduced by Austria, Italy and Turkey.

The French digital tax aims prevent tech companies from dodging taxes by reporting their earnings in low-tax European Union countries.

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"I'm not in love with those (tech) companies, but they're our companies", Trump said Tuesday ahead of a sure-to-be-tense meeting with French President Emmanuel Macron in London.

This tax is specifically designed for tech companies in two categories - marketplace (Amazon's marketplace, Uber, Airbnb...) and advertising (Facebook, Google, Criteo...).

The tax affects companies with at least 750 million euros ($830 million) in annual global revenue on their digital activities.

"We respectfully urge the United States, France, and all participating governments to focus on a successful and lasting tax policy resolution" at the Organization for Economic Cooperation and Development (OECD), she said in a statement. In order to avoid tax optimization schemes, big tech companies that generate significant revenue in France are taxed on their revenue generated in France.

The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying. The US has also prepared to broaden tariffs against the bloc as part of a long-running dispute over aircraft subsidies.

The US proposed retaliatory tariffs against France on Monday for its new digital services tax.

"We can see that the United States is shifting into reverse", Le Maire said, reported AFP, adding that while the USA had expressed interest in an "international solution" from the Organization for Economic Co-operation and Development, Washington "now isn't sure it wants one". His government is trying to use France's national tax as a bargaining chip, saying it would withdraw it if there is agreement on an worldwide solution - in talks under the stewardship of the Organization for Economic Cooperation and Development.

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