France Promises EU Retaliation After U.S. Trade Threats -- Update

Date : 03/12/2019 @ 22:06
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France Promises EU Retaliation After U.S. Trade Threats -- Update

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By Noemie Bisserbe 

PARIS -- French Finance Minister Bruno Le Maire said the European Union would strike back against the U.S. if President Trump follows through on a plan to impose tariffs on French imports, in what could develop into a trans-Atlantic tit-for-tat on trade.

On Monday, the Trump administration proposed tariffs of up to 100% against $2.4 billion of French imports -- ranging from cheese and wine to handbags and porcelain -- saying the nation's new digital-services tax unfairly targets U.S. tech companies such as Apple Inc. and Alphabet Inc.'s Google unit.

Mr. Trump, in a news conference in London on Tuesday, said "They are American companies, I don't want France taxing American companies."

The $2.4 billion in imports threatened with tariffs is slightly less than 5% of the $52 billion worth of goods imported from France in 2018.

Mr. Le Maire said the U.S. tariff threats were unacceptable. Speaking on French radio Tuesday, Mr. Le Maire said if America went ahead, "The European Union would be ready to retaliate."

The European Commission, the EU's executive arm, didn't immediately respond to requests for comment.

The latest spat over trade comes as President Trump is in Europe for a NATO summit and criticized French President Emmanuel Macron's recent comments about the military alliance.

In an interview with the Economist, Mr. Macron warned that Europe was experiencing "the brain death of NATO" and renewed his call for the continent to bolster its own military capabilities. Mr. Trump on Tuesday said Mr. Macron's statement was "very insulting" and that he could see France breaking off from the alliance. Mr. Trump added that "nobody needs NATO more than the French, the one who benefits the least is the U.S."

The new tariff threats risk further escalating trade tensions between Europe and the U.S. already strained by the Trump administration's decision last year to hit the bloc with steel and aluminum duties, and to impose tariffs this year on $7.5 billion in aircraft, food products and other goods from the EU.

President Trump's tariff proposal also raises pressure on members of the Organization for Economic Cooperation and Development, including most of the world's high-income nations, to agree on a new international framework for taxes on digital services as part of a global debate on how to tax the growing internet economy.

France had pledged to repeal its new tax -- introduced in July -- once an agreement is reached at the OECD, but progress has been slow.

The Trump administration is worried the tax -- known as the DST -- is discriminatory and a burden on U.S. commerce.

"People take advantage of American companies, if anyone is going to take advantage of our companies it's us," Mr. Trump said on Tuesday.

Mr. Le Maire said OECD members had come up with a good proposal that took into account U.S. concerns and that they were waiting for a response from the Trump administration. He called on the U.S. to honor its commitment in August, during a Group of Seven summit in Biarritz, to work with OECD members to develop a new tax framework for tech giants.

France's digital tax measure is the first in a series of proposed national taxes on digital services being debated across Europe. French lawmakers approved the new tax in the summer, just hours after U.S. Trade Representative Robert Lighthizer said his office would investigate it under the same broad law the Trump administration relied on for its trade conflict with China.

In an investigation report released late Monday, the Mr. Lighthizer's office said the DST applies largely to services where U.S. companies are dominant and doesn't tax services where French companies are more successful.

The French tax applies a 3% levy on revenue that big tech companies reap in France from such activities as undertaking targeted advertising or running a digital marketplace.

In August, President Emmanuel Macron said U.S. and French officials had agreed on a proposal stipulating that France will reimburse U.S. tech companies if they end up paying more taxes under the French tax than they would under taxation rules that the OECD is currently negotiating.

Emre Peker in Brussels contributed to this article

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com

 

(END) Dow Jones Newswires

December 03, 2019 05:51 ET (10:51 GMT)

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