Published: Wed, December 04, 2019
Money | By Ethel Goodwin

Primed to retaliate with European Union over US tariff threat against Paris

Primed to retaliate with European Union over US tariff threat against Paris

Robert Lighthizer said the tariff decision "sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies".

The U.S. government on Monday said it may slap punitive duties of up to 100% on $2.4 billion in imports of French Champagne, handbags, cheese and other products, after concluding that France's new digital services tax would harm U.S. tech companies. During an interview with Radio Classique, he explained "this is not the sort of behavior we expect from the United States toward one of its main allies, France, and toward Europe in general".

France's 3% levy applies to revenue from digital services earned by companies with more than 25 million euros ($27.86 million) of revenues from France and 750 million euros worldwide.

Around 30 companies would be affected, including European, Chinese and American firms.

The reality is that the digital tax doesn't target U.S. companies alone as it also affects Chinese, German, British and even French tech companies.

"They're starting to tax other people's products so therefore, we go and tax them", Trump said in London on Tuesday ahead of a North Atlantic Treaty Organisation alliance summit. The U.S. had already levied taxes on certain European Union farm products and civil aircraft in October, on the back of a related WTO ruling.

The European Commission backed France. "We'll see what happens". While the proposed tariffs directed at France are small in comparison to the China levies, a USA move on a member of the European Union might open Trump up retaliation from Brussels. If anyone is going to take advantage of American companies, it's going to be us. They had agreed in August to try to find a compromise, but a 90-day deadline for talks expired last week.

The U.S. also criticized the French tax for targeting companies' revenue, not their profits, and for being retroactive.

"I think he thinks it makes him look tough, it makes him look unconventional and it focuses all the attention on his actions", she said.

These announcement, which comes after an adverse conclusion by the office of the U.S. Trade Representative (USTR) following a trade practices investigation into France's Digital Services Tax (DST), could including champagne, porcelain and some cheeses.

Under the agreement, the United States would temporarily refrain from imposing new retaliatory trade measures on French products in connection with the digital services tax.

The USTR has scheduled public hearings on the proposal to impose "duties of up to 100 percent on certain French products" and the possibility of "imposing fees or restrictions on French services".

If there is no deal or substantial progress in talks before December 15, tariffs on remaining Chinese imports - including mobile phones, laptop computers and toys - will take effect, Ross told U.S. business news network CNBC on Tuesday.

But as the global economy slows, the USA dollar tends to strengthen as it becomes a safe haven for nervous investors around the world.

The WTO is expected to grant tariff rights to the European Union early next year, as a response to the subsidies the U.S. gave to Boeing over the years.

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