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Trump targets French wine to retaliate for France’s digital tax

PortandTerminal.com, July 26, 2019

The United States will announce retaliatory action against France in response to the country’s new tax affecting American technology companies, President Donald Trump said Friday.

WASHINGTON – The United States will announce retaliatory action against France in response to the country’s new tax affecting American technology companies, President Donald Trump said Friday.

He suggested he could target French wine with tariffs — a move experts considered the most likely U.S. response to the French digital services tax.

“I’ve always said American wine is better than French wine!” President Trump (a teetotaller) tweeted.

Context

Photo: Getty Images

Earlier this month, France passed a 3% tax that will affect firms such as Facebook and Google that draw about $28 million or more in revenue from digital services in France.

They say a levy is needed because big, multinational internet companies such as Facebook and Amazon are currently able to book profits in low-tax countries like Ireland, no matter where the revenue originates. Political pressure to respond has been growing as local retailers on main streets and online have been disadvantaged.

American reaction

After the French announced the digital tax, the Trump administration started an investigation under Section 301 of the Trade Act of 1974.

If, after the probe, the U.S. determines the tax is discriminatory or unreasonably targets U.S. firms, Trump could respond with tariffs. Trade experts considered Trump’s most likely response a 100% tariff on French wine — one of the country’s signature, symbolic products.

France exported 3.2 billion euros (or about $3.6 billion) in wine to the U.S. last year, according to the Federation of French Wines and Spirits Exporters. The U.S. was France’s biggest wine export market.

Outlook

Tariffs on France would open up another conflict as Trump tries to navigate thorny trade relationships around the globe.

Other EU countries including Austria, Britain, Spain and Italy have also announced plans for their own digital taxes suggesting that more tit-for-tat American trade tariffs may be on their way.

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