US to impose tariffs on French products amid digital services tax dispute

The United States plans to impose 25-percent additional tariffs on about US$1.3 billion worth of French products in response to the country's digital services tax that impacts major US technology companies, the Office of the United States Trade Representative announced on Friday.

"In determining the level of trade covered by the additional duties, the US Trade Representative considered the value of digital transactions covered by France's DST (digital services tax) and the amount of taxes assessed by France on US companies," the USTR's Office said in a notice.

"Additional duties of 25 percent on the products of France covered by the trade action should result in the collection of tariffs on goods of France at comparable, though somewhat lower amounts," the notice said.

The USTR has also determined to suspend the additional tariffs on French products for up to 180 days, a period ending on January 6, 2021, to "allow additional time for bilateral and multilateral discussions that could lead to a satisfactory resolution of this matter."

The United States had launched and completed a Section 301 probe into France's digital services tax regime but agreed to delay the imposition of tariffs on the country, as the two sides were negotiating a multilateral deal on international taxation at the Organization for Economic Cooperation and Development.

But in a letter to four European finance ministers in June, US Treasury Secretary Steven Mnuchin said the United States will not continue with the negotiations on digital taxation at the OECD as discussions had reached an "impasse."

In response, French Economy and Finance Minister Bruno Le Maire said that "this letter is a provocation towards all the partners at the OECD when we were centimeters away from an agreement." France will apply taxes on digital giants this year "whatever happens," he said.

The United States has also launched Section 301 investigations into digital services taxes considered by 10 US trading partners, including the European Union, Brazil and India.

The so-called Section 301, under an outdated US trade law adopted in 1974, allows the US president to unilaterally impose tariffs or other trade restrictions on foreign countries.

The global trading community has become increasingly concerned that the US government's frequent use of Section 301 would go against the World Trade Organization rules, undermine the multilateral trading system and disrupt the global supply chain.