First, a dispute over subsidies in the aerospace industry affected the price of your French wine. Now, a dispute over a tax on digital services might significantly impact the price of your Champagne. Hey, no one said understanding economics was easy, but who knew it could be this bad for your dinner party?
The U.S. Trade Representative has suggested that about $2.4 billion worth of French products—including high profile items like Champagne and cheeses—could receive new duties as high as 100 percent, according to CNN Business. No date has been proposed for the tariffs, but a hearing is scheduled for next month.
The announcement comes after the trade office released a report this week investigating France’s relatively new 3 percent tax on the revenues of digital service providers like Google and Facebook. According to the executive branch report, this tax "is intended to, and by its structure and operation does, discriminate against U.S. digital companies," and the measure is both burdensome to American companies and "contravenes prevailing international tax principles."
"I'm not going to let people take advantage of American companies," President Trump was quoted as saying today. He then ironically (unironically?) continued, "If anyone is going to take advantage of the American companies, it's going to be us, it's not going to be France."
Back in October, the Trump administration placed import duties of 25 percent on over a hundred products from across the E.U.—including French wine, Italian cheeses, and Scotch whisky—after the World Trade Organization gave the U.S. the green light to retaliate for what were deemed to be unfair subsidies the E.U. was providing to the European aircraft manufacturer Airbus.
This time around, any new tariffs would be directed specifically a France since the digital services tax is a French regulation. However, other European countries such as Italy, Spain, and the United Kingdom are reportedly considering similar taxes. Meanwhile, French Finance Minister Bruno Le Maire said that, if the U.S. did take action against French products, the European Union as a whole "would be ready to retaliate strongly."
Worth noting is that this isn’t the first time the Trump administration has floated that 100 percent tariff threat: Trump apparently tossed out that number back in August before the whole debate was temporarily pushed to the backburner.
But if 100 percent duties did come to fruition, the affect would likely be significant: Back in October, we looked at how the 25 percent Airbus tariffs could negatively affect wine importers in the U.S. Those duties didn’t apply French sparkling wine like Champagne, and at the time, importers were happy to have dodged a bullet. But this time around, the result could be less like a bullet and more like a nuclear bomb.