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Trump Administration Proposes Tariffs on $2.4 Billion of French Goods -- Update

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12/02/2019 | 07:00pm EST

By Josh Zumbrun in Washington and Noemie Bisserbe in Paris

The Trump administration proposed tariffs of up to 100% against $2.4 billion of French imports, saying the tariffs are justified because of a new digital-services tax imposed by France that weighs heavily on U.S. technology companies.

The Office of U.S. Trade Representative Robert Lighthizer has been working on the report for months and the action is designed to pressure France to reach a new agreement on taxing digital services that doesn't disadvantage American companies. Under the process outlined by the USTR, the tariffs wouldn't take effect until January at the earliest, giving the two sides a window to continue negotiations.

The USTR also threatened that such tariffs could be enacted in the future against Austria, Italy and Turkey, all of which also have digital-services taxes.

"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," Mr. Lighthizer said in a statement. "The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies."

The USTR identified 63 different tariff codes, covering items from cheese and wine to handbags and porcelain. The $2.4 billion in imports potentially threatened by the tariffs is slightly less than 5% of the $52 billion worth of goods imported from France in 2018.

The tariff action against France uses the same broad law that the U.S. has used to impose tariffs against China.

Spokespeople for the French embassy and French finance ministry didn't immediately respond to a request for comment.

France's digital-tax measure is the first in a series of proposed national taxes on digital services being debated across Europe. French lawmakers approved the new tax in July, just hours after Mr. Lighthizer said his office would investigate the tax.

The French tax, which is retroactive to the beginning of 2019, applies a 3% tax on revenue that companies reap in France from such activities as undertaking targeted advertising or running a digital marketplace.

In August, President Emmanuel Macron said U.S. and French officials had agreed on a proposal stipulating that France will reimburse U.S. tech companies if they end up paying more taxes under the French tax than they would under taxation rules the Organization for Economic Cooperation and Development is currently negotiating.

France pledged to repeal its new tax once an agreement is reached at the OECD. But progress has been slow.

French Finance Minister Bruno Le Maire said earlier on Monday that after asking for an international solution at the OECD level, the U.S. was backtracking. "They are now telling us that they don't want this solution and are simply going to impose new sanctions on France," Mr. Le Maire said, speaking on the radio. "My message is clear: We will never, never, never abandon our will to tax fairly tech giants," he added.

The USTR said Monday that the French tax "discriminates against U.S. digital companies, such as Google, Apple, Facebook and Amazon."

"Statements by French officials responsible for proposing and enacting the French DST show that the law deliberately targets U.S. companies," the USTR said in its report released Monday night. "Minister of Economy and Finance Bruno Le Maire, as well as other officials and members of the French parliament, repeatedly referred to the French DST as the 'GAFA tax,' which stands for Google, Apple, Facebook, and Amazon."

The USTR also found that the French tax applies only to services where U.S. companies are dominant and doesn't tax services where French companies are more successful.

The USTR said it would hold public hearings on January 7 of next year and wait to receive public comments through at least January 14, giving France and the other members of the OECD more time to negotiate.

Katherine Stech in Washington contributed to this article.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Noemie Bisserbe at noemie.bisserbe@wsj.com

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