Donald Trump has vowed swift retaliation against France for imposing a tax on digital transactions that would hurt US technology companies, in a new sign of souring transatlantic economic relations.
In a tweet on Friday, Mr Trump said the US should be the only country taxing “our great American technology companies”. He then attacked Emmanuel Macron, the French president, and warned that punitive measures were on their way.
The US president said: “We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”
Earlier this month, the office of the US trade representative launched a probe into whether France’s digital tax amounts to an unfair trade practice, which could pave the way for Washington to hit back against Paris, including through tariffs.
But Mr Trump’s tweet suggests that the US administration is considering punitive action against France through other channels as well. The US Treasury department has taken the lead on challenging France with regard to the digital tax, and some people close to the dispute say it would be expected to take charge of crafting US countermeasures against Paris.
One administration official confirmed that Treasury was leading the discussions on the retaliation.
Following Mr Trump’s threat, Judd Deere, a White House spokesperson, said the US was “extremely disappointed” by the French tax, describing it as a “unilateral measure” targeting “innovative US technology firms”.
“The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against US-based firms. The US trade representative has already launched a Section 301 investigation into France’s digital services tax, and the administration is looking closely at all other policy tools,” Mr Deere said in a statement.
France this month moved ahead with its digital tax after years of frustration with the ability of US technology groups to avoid paying large tax bills in Europe, despite generating big revenues in many countries. EU talks to impose a common digital tax have faltered, and multilateral negotiations at the OECD have moved slowly, prompting Paris to move unilaterally in the interim.
Italy has also moved to impose a similar digital tax, and the UK is considering one. But only France has incurred Mr Trump’s wrath, so far.
French finance minister Bruno Le Maire said France would maintain its national tax on digital groups until an international agreement on a common tax regime was reached at the OECD. “Universal taxation of digital operations is a challenge that affects us all,” he said.
The spat over France’s digital tax comes as economic relations between the US and the EU appear to be deteriorating. There are growing fears that the Trump administration will slap tariffs on cars and car parts before the end of the year, targeting Germany.
Meanwhile, Brussels and Washington are threatening new levies on each other in connection with a WTO fight over aircraft subsidies. Mr Trump and Jean-Claude Juncker, the outgoing EU commission president, had reached a trade truce a year ago at a White House meeting, laying out a process to reach a more comprehensive trade agreement. But those hopes have fizzled, as negotiators have sparred over agriculture, cars and other issues.
Additional reporting by Victor Mallet in Paris
