US threaten to impose tariffs on French goods over digital tax

France on Tuesday warned the United States of strong European Union (EU) retaliation if it imposed tariffs on key French products ranging from sparkling wine to cheese to handbags, in an intensifying row over taxing digital giants that risks spiralling into a new trade war.

The French parliament earlier this year infuriated the administration of President Donald Trump by passing a law taxing digital giants like Google, Apple, Facebook and Amazon for revenues earned inside the country.

The French tax, enacted earlier this year, imposes a three percent levy on the revenues earned by technology firms in France, which often come from online advertising and other digital services.

The tax affects companies with least €750 million in annual global revenue on their digital activities.

Talks to resolve the issue amicably have so far failed and on Monday the United States threatened to impose tariffs of up to 100% on $2.4 billion in French goods like sparkling wine, yogurt and Roquefort cheese.

“We were in contact yesterday with the European Union to ensure that if there are new American tariffs there will be a European response, a strong response,” French Economy and Finance Minister Bruno Le Maire said

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

Tant que les géants du numérique continueront à payer 14 points d’impôt de moins qu’une PME, nous nous battrons pour mettre en place une taxation internationale du numérique. C’est une question de justice et c'est ce qui nous a amenés à adopter une taxation 🇫🇷 ! pic.twitter.com/Oiwur3XDAo

— Bruno Le Maire (@BrunoLeMaire) December 3, 2019

The U.S. 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 worth of Chinese imports in the biggest trade war since the 1930s.