President Trump views tech companies such as Google, Facebook, or Amazon as part of his political opposition. However, he’s prepared to protect them from being subject to a new digital services tax that France approved in July.
The White House announced it would retaliate against a French tax that takes 3% of the annual revenue of technology companies earned from French users. Unlike some of the other tariffs implemented by the Trump administration, this one is receiving bipartisan support.
“They’re American companies. And we want to tax American companies,” Trump told reporters during a London NATO summit as French President Emmanuel Macron sat next to him. “That’s important. We want to tax them. That’s not for somebody else to tax them.”
The Office of the U.S. Trade Representative said in early December that it was planning tariffs of up to 100% on French products totaling $2.4 billion in trade annually. The targeted items include butter, cheddar and blue cheese, sparkling wine, handbags, cosmetics, soap, and porcelain tableware.
“USTR’s decision today 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,” U.S. Trade Representative Robert Lighthizer said. The tariffs are being imposed under Section 301 of the Trade Act of 1974, which requires a public comment period. The first such hearing has been scheduled for Jan. 7.
France adopted the tax on tech companies to make it difficult for them to shift profits to low-tax jurisdictions in the European Union such as Ireland. Macron’s broader goal is reportedly to push the Organization for Economic Cooperation and Development, the international economic organization comprising most Western countries, to support a similar scheme worldwide.
Macron defended the tax, saying he’s “determined to defend the interests of our country and of Europe.”
Prior to the tariff threat, the Trump administration had repeatedly warned against such measures. The tech companies have argued that they have followed the existing tax rules of the EU.
The USTR’s report said the French tax “is intended to, and by its structure and operation does, discriminate against U.S. digital companies.” Among other evidence, it pointed to a statement by French Economic Minister Bruno Le Maire that the tax was structured to only affect certain companies and not French small- to medium-sized enterprises. “The goal of these thresholds is very clear: We do not want to slow down the innovation of our startups or curb the digitization of our SMEs.”
The proposed tariffs on $2.4 billion worth of goods followed months of behind-the-scenes talks to resolve the dispute. Macron even announced in August that a deal had been reached, but Trump declined to confirm that, and the USTR’s investigation continued.
Lighthizer said the USTR was contemplating similar inquiries into the digital services taxes enacted by Austria, Italy, and Turkey. The USTR’s investigation into France’s tax was based on the same section of the Trade Act used by the White House to levy tariffs of up to 25% on $550 billion worth of Chinese goods.
Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and Sen. Ron Wyden, an Oregon Democrat and the committee’s ranking minority member, applauded the announcement. “The French digital services tax is unreasonable, protectionist, and discriminatory,” they said in a joint statement.
Trump has nevertheless held out an olive branch, characterizing the digital services tax issues as “a minor dispute” and one that could be worked out.
“I am sure within a short period of time, things will be looking very rosy, we hope. That’s usually the case between the two of us — we get it worked out,” Trump said during the same meeting with Macron.
Macron agreed there was still a chance for that. “I think we can settle this situation with President Trump. I am rather confident we can have a discussion together about it,” he told reporters afterward.
