Dismay in France As Trump Mulls Tariffs on French Wines in Response to Tech Taxes

By Fayçal Benhassain | July 28, 2019 | 7:40pm EDT
(Photo by Philippe Desmazes/AFP/Getty Images)

Paris (CNSNews.com) – French wine industry representatives reacted with dismay at the weekend to President Trump’s threat to slap tariffs on French wines in response to Paris’ decision to apply a tax on U.S. tech companies, while the government here sought to play down the rift.

“France just put a digital tax on our great American technology companies,” Trump tweeted on Friday. “If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on [President Emmanuel] Macron’s foolishness shortly.”

He was responding to a vote by French lawmakers approving a three percent tax on turnover earned in France of tech giants including the so-called GAFA companies – Google, Amazon, Facebook and Apple.

Trump floated the idea of placing a tariff on French wines in response.

“I’ve always said American wine is better than French wine!”

French media outlets criticized Trump for his choice of words directed at Macron.

But Economy Minister Bruno Le Maire, who authored the legislation, tried to play down potential problems, saying on Saturday, “We want to work closely with our American friends on universal taxation of digital activities.”

He added that France hopes to reach an agreement with the U.S. by the time a G7 summit takes place in southern France on August 24-26. It brings together the world’s biggest economies – the U.S., Britain, France, Japan, Germany, Italy and Canada. This year’s main focus is on fighting income and gender inequality and protecting biodiversity. Trump and Macron are due to meet on the sidelines.

The White House said in a press release on Friday that Trump and Macron had spoken by phone – reportedly after the tweet was posted – and that the French GAFA tax was raised. The statement made no mention of French wines.

Macron’s office in a statement Saturday said Macron insisted during the phone conversation that “GAFA taxation is a subject of common interest, and not only French,” and said the two countries must continue to act with the goal of getting a broad international agreement on this question.

Jean-Marie Barillère, president of a body that represents the interests of French wine makers, expressed concern in media interviews about the possibility of U.S. tariffs.

“The United States is the first export market for French wines and a potential taxation of several tens of percent, for example, would be dramatic for our trade balance and markets in the United States,” he told Radio France International.

French winegrower Fernand Baxias told the private LCI television channel that Americans would buy less French wine if it was taxed, saying such a move on the part of the U.S. would be “ridiculous.”

According to the annual report of the French wine and spirits exporters organization, exports of French wine to the U.S. grew by 4.6 percent year-on-year in 2018, to $3.56 billion.

The three percent GAFA tax, due to take effect by the end of September, will be retroactive to January 1 this year, and is predicted to bring in $445 million in 2019, $612 million in 2020 and $724 million in 2021.

Le Maire has said the tax would be withdrawn as soon as there is a global agreement on taxing tech companies. He hopes France’s unilateral step will push forward international negotiations.

The tax will apply to companies with a worldwide turnover of at least $845 million, and turnover in France for digital activity of more than $27 million. Some 30 companies are expected to be affected, including Google, Amazon, Facebook, Apple, Microsoft and Airbnb.

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