US imposes tariffs on $1.3bn of French goods but delays start date

Make-up, soap and handbags among the goods facing additional levies in response to France's 'digital tax' on internet companies

A woman working in a Hermes workshop in Hericourt, eastern France. Handbags are among the $130bn worth of goods facing a 25 per cent US tariff. AFP

The US announced a tariff of 25 per cent on $1.3 billion (Dh4.77bn) worth of French goods in a long-running battle between the two countries over taxes on technology giants.

The Office of the US Trade Representative said on Friday that it would again push back the collection of the levies by up to 180 days as France has yet to begin collecting its digital tax.

The Trump administration said it would also grant more time to ongoing talks on a global deal at the Organisation for Economic Cooperation and Development.

Affected items include make-up, soap and handbags. However, items excluded from the US tariff list include French wine and cheese.

France held firm on its plans to resume collection of a national digital tax that hits technology giants including Amazon, Alphabet’s Google and Facebook, and said on Friday that it would not be swayed by threats of US sanctions.

“France’s response will be unchanged,” finance minister Bruno Le Maire said in Brussels. “If there is no international solution by the end of 2020, we will, as we have always said, apply our national tax.”

The US withdrew last month from international talks over a digital tax deal after failing to reach an agreement on developing a global levy.

The OECD has sought to help about 140 countries agree on how to address how multinationals – particularly big technology companies – are taxed in the nations where they have users or consumers.

An international deal would prevent dozens of countries from introducing their own versions of levies.

Several European countries – including Austria, France, Spain, Hungary, Italy, Turkey and the UK – announced plans for a digital services tax while many others held discussions on the matter. India expanded a levy that it already uses in April.

“We call on the US to return to the OECD negotiations on taxing digital giants,” Mr Le Maire said. “Sanctions are not a way of operating between countries that are friends, as the US and France are.”

The announcement sent a clear signal to France and other countries considering similar measures that there would be consequences to singling out American technology companies, said Clete Willems, a partner at law firm Akin Gump.

Still, the tariff delay provided a valuable opportunity to solve this multilaterally, he said.

“Both sides need to compromise,” he said. “France needs to back away from trying to tax digital companies before all global service providers and the US needs to stop insisting that the new rules be optional.”

US politicians expressed their support for the tariffs shortly after the announcement.

“Retaliatory tariffs aren’t ideal but the French government’s refusal to back down from its unilateral imposition of unfair and punitive taxes on US companies leaves our government with no choice,” the top Republican, Chuck Grassley, and Democrat Ron Wyden on the Senate Finance Committee – with jurisdiction over taxes – said.