France vows to hit back on US tariff threat

France’s government said the European Union would retaliate if the US follows through on a threat to hit about $2.4 billion (Dh8.81bn) of French products with tariffs over a dispute concerning how large tech companies are taxed.

The decision by the office of the US Trade Representative marks a setback for efforts to stop a conflict over a digital services tax. The levy, which the USTR says “discriminates against US companies”, would hit the revenue of large tech companies including Google, Apple, Facebook and Amazon.

In response the American tariffs could target Champagne, cheeses, handbags and make-up.

“It’s not worthy of an ally, and it’s not the behaviour we expect from the US towards one of its main allies, France, and more generally, Europe,” French finance minister Bruno Le Maire said yesterday. “If there were new US sanctions, the EU would be ready to retaliate.”

Speaking in London, US President Donald Trump said it is not France’s role to tax US businesses.

“They’re American companies,” Mr Trump said, referring to Facebook, Google and Twitter. “If they’re going to be taxed, the US will tax them.”

The USTR’s Robert Lighthizer said the agency is also exploring whether to open investigations into similar digital taxes by Austria, Italy and Turkey. The move comes hours after Mr Trump announced a barrage of other tariffs on steel and aluminium from Argentina and Brazil.

LVMH, the maker of Louis Vuitton handbags and Moet & Chandon champagne, fell as much as 2.1 per cent in Paris trading, while makeup company L’Oreal lost as much as 1.4 per cent and leather-goods maker Hermes International declined 2.1 per cent.

The US tariffs and the French tax were set to have been a priority during a meeting between Mr Trump and Mr Macron at a Nato conference in London yesterday. They had agreed in August to try to find a compromise, but a 90-day deadline for talks expired last week.

Mr Le Maire said in France that the solution is not nonstop retaliation and sanctions, because that is “bad for our political relationship and growth and the economic recovery everywhere in the world”.

“We are ready to withdraw the French national tax as soon as there is a solution and there is a solution at the Organisation for Economic Co-operation and Development level,” he said.

Mr Macron argues that moving ahead with a tax on tech companies is necessary because the structure of the global economy has shifted to one that is based on data, rendering current systems archaic.