PARIS -- France bristled at a U.S. threat to slap 100% tariffs on French cheeses, Champagne and other products, with the French leader telling President Donald Trump on Tuesday that the move would amount to an attack on all of Europe.
The U.S. trade representative proposed the tariffs on $2.4 billion in goods Monday in retaliation for a French tax on global tech giants including Google, Amazon and Facebook.
The tax imposes a 3% annual levy on French revenue of any digital company with yearly global sales worth more than $830 million and French revenue exceeding $27.5 million.
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 investigate China's technology policies, leading to tariffs on more than $360 billion worth of Chinese imports in the biggest trade war since the 1930s.
France's reaction was swift and robust, with President Emmanuel Macron and his finance minister both warning of a European retaliation if the U.S. measure is implemented.
"We'll see where the discussions lead in the coming weeks, but it will involve a European response," Macron said in a meeting with Trump on the sidelines of a NATO summit in London. "Because, in effect, it wouldn't be France that is being sanctioned or attacked but Europe."
Macron said it's "not fair" that digital revenue is taxed less than traditional revenue. He said France shouldn't be singled out for wanting to correct that imbalance with a tax on tech outfits.
"My first question is what will happen with the United Kingdom, which adopted the same tax? For Italy, the same tax? Austria, Spain," Macron asked. "If we're serious, those countries will have to be treated the same way."
The U.S. move is likely to increase trade tensions between the U.S. and Europe. 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," Trump said ahead of his meeting with Macron.
"They're our companies, they're American companies," Trump said. "If they're going to be taxed, the U.S. will tax them."
Later in the day, however, he appeared to walk back his earlier tough stance, suggesting that it would probably be possible to achieve a compromise with France on trade.
"We do a lot of trade with France and we have a minor dispute. I think we'll probably be able to work it out," Trump said. "But we have a big trade relationship, and I'm sure that within a short period of time, things will be looking very rosy, we hope. That's usually the case with the two of us, we work it out."
French Finance Minister Bruno Le Maire said the U.S. tariff threat is "simply unacceptable. ... It's not the behavior we expect from the United States toward one of its main allies."
The French tech tax, he said, 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 on the matter.
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 very low corporate taxes.
Le Maire noted that France will reimburse the tax if the U.S. agrees to the international tax plan.
French wine and cheese producers expressed dismay about being caught in the middle of the battle over digital revenue. Cheese producers warned that the U.S. measure would hit small businesses hardest.
An industry association for pungent Roquefort cheese, among the targeted products, said the 100% tariffs could wipe out the U.S. market -- 300 tons a year -- for the blue-veined cheese.
"We're lucky to have a product known around the world but the reverse side of that is that every time there's a trade dispute, Roquefort is systematically targeted," said Jerome Faramond, the association president.
Le Maire 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 U.S. on how to solve this issue amicably."
The U.S. 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 over a separate dispute over subsidies to Airbus and Boeing.
The U.S. trade office claims that France's new digital-services tax discriminates against U.S. companies.
France disputes that, saying it targets European and Chinese businesses, too.
An attempt to agree on a Europe-wide tax fell through earlier this year when four countries -- Sweden, Finland, Denmark and Ireland -- declined to sign off on it. But Margrethe Vestager, currently the EU's antitrust chief, said last week that the bloc would try to find unity again if there isn't a global agreement.
Other European countries are planning to levy a digital tax without waiting for an international solution. Italy's government has said that it will implement on Jan. 1 a tax on digital revenue, and Boris Johnson's Conservative Party, which leads the polls for this month's U.K. general election, has committed to a digital-services tax.
Information for this article was contributed by Angela Charlton, John Leicester, Aamer Madhani, Zeke Miller, Darlene Superville, Paul Wiseman and Raf Casert of The Associated Press; by James McAuley of The Washington Post; and by William Horobin, Jenny Leonard and Laura Davison of Bloomberg News.
Business on 12/04/2019