Champagne, handbags and Gruyere cheese could become a lot more expensive for US consumers after the government said it was considering slapping duties of up to 100 per cent on $2.4 billion (£1.85bn) of French imports.
The move is a reaction to France’s new digital tax, which the US believes is “unusually burdensome for US companies,” including Alphabet Inc’s Google, Facebook, Apple and Amazon.
The US Trade Representative’s office said its “Section 301” investigation found that the proposed French tax was “inconsistent with prevailing principles of international tax policy.”
France’s digital tax is the latest in a series of innovations from European countries as they seek to prevent tech giants avoiding paying an estimated $500bn a year in taxes by shifting their profits from high-tax countries, such as the UK and France, to low-tax states including Ireland, Luxembourg and Malta.
Earlier this week a proposed new rule that would have forced multinational companies to reveal how much profit they make and how much tax they pay in each of the 28 member states, was blocked by 12 smaller EU countries.
“The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies,” US Trade Representative Robert Lighthizer said. The agency said it would collect public comments on its proposed tariff list and the option of imposing fees or restrictions on French services and present them at a public hearing scheduled for January 7th 2020. The list includes sparkling wines, handbags and make-up products. Companies affected include luxury goods giant LVMH and cosmetics maker L'Oréal.
The plans have won support from both sides of the US political spectrum.
“The French digital services tax is unreasonable, protectionist and discriminatory,” Senators Charles Grassley and Ron Wyden, the top Republican and Democrat on the Senate Finance Committee, said in a joint statement.
The French are however adamant that they are sticking to their plans no matter how the US reacts. “We will not give up on taxation” of digital firms, an official said.