President Donald Trump has ordered an investigation into French plans to slam big tech companies, like Amazon, Apple, Google, and Facebook, with giant new taxes.
The investigation, known as Section 301, was announced by the US Trade Representative Robert Lighthizer on Wednesday night. There’s a chance it could lead to retaliatory tariffs that could escalate to a new trade war.
The new French digital-service tax, approved by French lawmakers, requires tech giants with revenues exceeding $845 million to pay a 3% tax on their profits in France.
This sums up to about $563 million a year flowing into the French public treasury – which according to Minister Le Maire, accounts for “justice”.
The measure is an attempt to strike balance with the complex arrangements that US companies keep in place to be able to avoid taxation on their profits.
But according to Lighthizer’s office, there’s a reason to believe that France is “unfairly targeting the tax” on US companies. In response, President Trump called for the investigation.
“The United States is very concerned that the digital-services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” Lighthizer said.
“The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
The trade act grants the US the authority to “respond to a foreign country’s unfair trade practices” said Lighthizer office, suggesting the idea that it could decide to hit back at the tax.
It wouldn’t be the first time for Trump to take action against Europe. In May last year, he imposed tariffs of 25% on European steel and 10% on aluminum.
Le Maire said threats for the US were not a solution. “I profoundly believe that between allies we can and should resolve our differences through means other than threats,” he said.
“France is a sovereign country which makes sovereign decisions about its tax regime and it will continue to make sovereign decisions about its tax regime.”