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US increased tariff on French import in response to digital services tax

The US said it may raise tariffs on French imports as France's new digital services tax would hurt US tech companies.

US increased tariff on French import in response to digital services tax
Kyle Grillot/Bloomberg

The United States government on Monday said it may slap punitive duties of up to 100 percent on $2.4bn in imports of French Champagne, handbags, cheese and other products, after concluding that 's new digital services tax would harm US tech companies.

The US Trade Representative's office said its "Section 301" investigation found that the French tax was "inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected US companies", including Alphabet Inc's Google, Facebook Inc, Apple Inc and Inc.

US Trade Representative Robert Lighthizer said the US government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.

"The USTR is focused on countering the growing protectionism of European Union member states, which unfairly targets US companies," Lighthizer said. His statement made no mention of proposed digital taxes in Canada or the United Kingdom.

The trade agency said it would collect public comments on its proposed tariff list through January 14 and hold a public hearing on January 7. It did not specify an effective date for the proposed 100 percent duties.

The list targets some products that were spared from 25 percent tariffs imposed by the US over disputed aircraft subsidies, including sparkling wines, handbags and makeup preparations, which would hit French luxury goods giant LVMH and cosmetics maker L'Oreal hard.

Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100 percent duties, along with numerous other cheeses.

The findings won favour from US legislators and USu tech industry groups.

"The French digital services tax is unreasonable, protectionist and discriminatory," Senators Charles Grassley and Ron Wyden, the top Republican and Democrat, respectively, on the Senate Finance Committee, said in a joint statement.

Spokespeople for the French embassy and the EU delegation in Washington could not immediately be reached for comment.

But prior to the release of the USTR's report, a French official said that France would dispute the trade agency's findings, repeating Paris' contention that the digital tax is not aimed specifically at US tech firms.

"We will not give up on taxation" of digital firms, the official said.

France's 3 percent levy applies to revenue from digital services earned by firms with more than 25 million euros ($27.86m) in French revenue and 750 million euros ($830m) worldwide.