Trump administration to impose tariffs on French products in response to digital tax

The Trump administration on Friday announced plans to impose 25 percent tariffs on about $1.3 billion worth of French products in response to the country’s digital service tax that impacts major U.S. technology companies.

The tariffs are set to take effect Jan. 6, 2021. Products that are set to be subject to the tariffs include makeup, soap and handbags, according to a notice issued by the Office of the United States Trade Representative (USTR).

The announcement of the tariffs comes after USTR in December determined that France’s digital tax is discriminatory and burdensome to U.S. commerce under section 301 of the U.S. Trade Act of 1974. At that time, USTR proposed tariffs of up to 100 percent on $2.4 billion of French products.

The tariffs announced Friday are smaller than the tariffs proposed in December, both in terms of the rate and the amount of products. The December list of products that could face tariffs included sparkling wine and cheese, which were not included in Friday’s list.

USTR said that it chose the volume of products subject to the tariffs after considering the amount of taxes France is expected to assess on U.S. companies under its digital tax.

“Additional duties of 25 percent on the products of France covered by the trade action should result in the collection of tariffs on goods of France at comparable, though somewhat lower amounts,” USTR said.

Earlier this year, the U.S. and France had reached a deal under which the U.S. agreed to hold off on tariffs and France paused its tax while talks about taxing the digital economy were ongoing at the Organization for Economic Cooperation and Development (OECD). But the U.S. became frustrated with those talks and stepped away from them.

USTR said that it is suspending the tariffs until January 2021 “to allow additional time for bilateral and multilateral discussions that could lead to a satisfactory resolution of this matter.”

France’s digital tax has been opposed by U.S. tech giants such as Facebook and Google, and is disliked by lawmakers on both sides of the aisle.

“Retaliatory tariffs aren’t ideal, but the French government’s refusal to back down from its unilateral imposition of unfair and punitive taxes on U.S. companies leaves our government with no choice,” Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) said in a statement Friday.

“We hope the French government views the Administration’s deferral of these tariffs as an opportunity to repeal its digital services tax and continue working with OECD member states on a multilateral approach that is fair to all parties,” they added. “Unilateral action that targets and discriminates against U.S. businesses will not be tolerated.”

USTR last month announced investigations into digital taxes that have been proposed or adopted in a number of other countries and the European Union, which could potentially result in tariffs on products from those jurisdictions.