Trump targets France with threat to slap tariffs on champagne
The Trump administration is threatening to slap tariffs on French products worth billions of dollars, as part of a major escalation of its trade war.
Champagne, luxury handbags and Roquefort cheese could be affected under the proposals, which are in response to a new French tax on big US tech firms.
According to US officials, the charges would cover French imports worth $2.4bn (£1.9bn).
The plans are aimed at making the goods less attractive to US consumers as they could double current prices.
The announcement, the latest in an expansion of US trade threats this week, contributed to a fall in global stock markets which deepened during a news conference given in London by Donald Trump in which he signalled there was no deadline for concluding his existing trade war with China – blamed for a global economic slowdown.
Ahead of a difficult NATO summit, he said: “If France puts a tax on our companies, I don’t want that,” adding: France wants to tax them out of the blue.”
He said he had a good relationship with his French counterpart but accused Emmanuel Macron of “sometimes saying things he should not do”.
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Mr Trump’s trade officials argue that France’s digital services tax unfairly discriminates against US firms such as Google, Facebook and Amazon.
The tax, which was introduced this year, is designed to prevent tech companies from avoiding taxes in France by placing key office functions in territories with a lower rate.
It imposes a 3% annual levy on the French revenues of digital companies with yearly global sales worth more than €750m (£580m) and French revenue exceeding €25m (£19.3m).
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The French finance minister responded to the tariff threat by saying it was not something to be expected from an ally.
Shares in French firms that could be affected, including luxury goods maker LVMH – behind the Louis Vuitton and Moet & Chandon brands – fell in response.
Shares in LVMH, which recently announced a takeover of US-based jewellery powerhouse Tiffany, were 1.5% down at the open in Paris.
The US Trade Representative Robert Lighthizer added that digital taxes introduced by Austria, Italy and Turkey could also be met with a trade response.
A similar tax scheme has been proposed by the UK, but it has not been enacted.
The US tariff threat against France – announced after US markets closed on Monday – came at the end of a day of already heightened trade tensions.
Hours earlier, the World Trade Organisation (WTO) granted Washington permission to impose its proposed 25% tariffs on a string of EU products including Scotch whisky in retaliation for subsidies to aerospace giant Airbus.
The EU is preparing a retaliation of its own under the dispute, dating back 15 years, for historic US financial support for Boeing.
Donald Trump also used his Twitter account to declare tariffs were to be slapped on steel and aluminium products shipped from Brazil and Argentina to the US, because the weakness of their currencies had left American businesses uncompetitive.
The spat between the US and its largest economic competitor, China, has already resulted in tit-for-tat tariffs on billions of dollars worth of each other’s goods since July 2018.
Relations between the world’s two biggest economies worsened last week after Mr Trump signed a bill in support of pro-democracy protesters in Hong Kong.
It was seen as setting back hopes of a so-called “phase one” trade deal with the Chinese to cool tensions.
The US is currently slated to raise tariffs against Beijing in mid-December should progress in trade talks continue to lag.
Mr Trump told reporters that he was even prepared to wait until after the US presidential election next year to resolve the crisis.
Renewed trade worries – largely blamed for a fallback in stock markets in Europe and the US on Monday – pushed stocks further into the red on Tuesday.
In London, the FTSE 100 was trading 1.7% lower by lunchtime, with growth-sensitive miners and energy firms worst hit.
However, part of the decline was attributed to a weakening in the dollar, which helped sterling climb 0.5% to $1.30.
A stronger pound tends to hurt the value of the index’s dollar-earning constituents as they get less for their US currency when they book it in the UK.
Commenting on the market view Neil Wilson, chief market analyst at Markets.com, said: “What we are seeing is the weaponisation of trade and using it for diplomatic purposes.
“It is no coincidence that these announcements come as Trump lands in London for the NATO summit and a chance to demand European allies spend more on defence.
“It will also draw attention away from the Chinese talks, which clearly are not yielding the necessary outcome as far as the White House is concerned…and it’s a clear signal to Beijing that Trump is not shying away from tariffs – as he said yesterday – if there is no phase one deal the tariffs will go up.”