Trump says he ‘might’ put tariffs on French wine as reprisal for digital tax

President Donald Trump said he “might” impose tariffs on wine from France after the country imposed a new digital tax that affects US technology companies.

“It might be on wine, it might be on something else,” Trump told reporters in the Oval Office on Friday. He made the remarks after threatening “substantial reciprocal action” against France earlier Friday over the tax.

French President Emmanuel Macron signed into law a 3% tax on the revenue of technology giants like Facebook and Amazon.com.

“We tax our companies, they don’t tax our companies,” Trump said.

France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!

— Donald J. Trump (@realDonaldTrump) July 26, 2019

The tax, retroactive to January, affects companies with at least 750 million euros in global revenue and digital sales of 25 million euros in France. About 30 businesses would be affected; while most are American, the list also includes Chinese, German, British and even French firms.

Trump has imposed – or made threats to impose – tariffs on a number of countries to force changes in their trade or immigration policies. France’s tax, and Trump’s response, threaten to further strain trans-Atlantic ties as the US and European Union prepare to negotiate a limited trade agreement on industrial goods.

A spokesperson for Macron declined to comment on Trump’s tweet. The French finance ministry said in a statement that universal digital taxation “concerns us all” and that it wants to reach agreement in international forums.

A battle of wine 

Trump last month promised to do “something” about French wine that he said is allowed into the US virtually tariff-free while France imposes duties on US wine, calling the arrangement unfair.

“I’ve always liked American wines better than French wines, even though I don’t drink wine,” the president said Friday.

He said he may impose the wine tariffs before a meeting of the Group of Seven meeting in late August.

Trump has complained about France charging tariffs on US wine in the past – without taking action. The president tweeted in November that it’s too hard for American wine producers to sell in France but that the US makes it “easy” to import French wines, which he said “must change.”

The US charges a tariff of 5 cents per 750 milliliter bottle of imported still wine and 14 cents for sparkling wine, according to the Wine Institute, an advocacy group for California winemakers. European Union tariffs for imported wine range from 11 cents to 29 cents per bottle, according to the group.

France hasn’t backed off from its planned digital tax even after the U.S. suggested it may use trade tools against the levy.

The US has said it will examine whether the tax would hurt its tech firms, using the so-called 301 investigation, the same tool Trump deployed to impose tariffs on Chinese goods because of the country’s alleged theft of intellectual property.

Trump’s tweet was followed by a White House statement saying the US is “extremely disappointed” by the tax. In addition to the 301 probe, the Trump administration is “looking closely at all other policy tools,” said spokesman Judd Deere.

“The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against US-based firms,” Deere said.

France isn’t alone among European nations in arguing that internet companies aren’t paying their fair share into public coffers.

Because they’re often domiciled in other countries – including low-tax jurisdictions such as Ireland or Bermuda – and shift money seamlessly across borders, companies that sell online can easily avoid paying taxes in nations where they nevertheless make significant sales.

France argues that the structure of the global economy has shifted to one based on data, rendering 20th-century tax systems archaic. According to 2018 figures from the European Commission, global tech companies pay a 9.5% average tax rate compared with 23.2% for traditional firms.

France became the first country in the EU to impose such a levy, with other nations, including the UK and Germany, mulling similar taxes. France had pushed for a EU-wide digital levy that was scrapped when four countries – Sweden, Finland, Denmark and Ireland – declined to sign off on it.

The tax comes as talks on a limited trans-Atlantic trade agreement on industrial goods have progressed slowly because the US and EU are at odds over whether to include agriculture in any final agreement. France is the country most adamantly opposed to making any agriculture concessions. Trump’s threat to impose a tariff of as much as 25% on European car exports has cast a cloud over the negotiations as well.