This archive report was first published on 11 July 2020.
On July 10, 2020, the Trump administration announced additional duties of 25% on French cosmetics, handbags, and other imports valued at $1.3 billion in response to France's digital services tax. The US Trade Representative's office stated that the delay in implementing the tariffs would allow for further time to resolve the issue, including through discussions in the Organisation for Economic Co-operation and Development (OECD).
The decision also reflected France's agreement to defer collection of its 3% tax on digital services. The US move follows a US Section 301 probe, which concluded that the French tax discriminates against US tech firms such as Google, Facebook, and Apple Inc.
France and other countries view digital service taxes as a way to raise revenue from the local operations of big tech companies, which they say profit enormously from local markets while making only limited contributions to public coffers.
US Trade Representative Robert Lighthizer first disclosed plans to impose new tariffs on French goods with deferred implementation on July 9, 2020. The $1.3 billion worth of goods is part of a list first published by USTR in December 2019.
The United States has initiated similar Section 301 investigations of digital services taxes adopted or being considered by 10 other countries, including Britain, India, and Turkey, which could result in tariffs against their goods.
OECD talks aimed at developing a multilateral solution for taxing digital services have failed to produce any results, with negotiations complicated by the coronavirus pandemic. Last month, US Treasury Secretary Steven Mnuchin suggested a pause in the OECD talks given the lack of progress there.
