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By Vivian Salama and Josh Zumbrun
WASHINGTON -- President Trump promised to take "substantial reciprocal action" against France after the nation's President Emmanuel Macron this week signed into law a tax on American tech giants like Alphabet Inc.'s Google and Amazon.com Inc.
"France just put a digital tax on our great American technology companies," Mr. Trump said on Twitter on Friday. "If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron's foolishness shortly. I've always said American wine is better than French wine!"
Despite Mr. Trump's mention of French wine, it couldn't be immediately determined what the reciprocal action would target.
In 2018, French imports to the U.S. totaled $52 billion, of which about $5 billion is alcoholic beverages, according to Commerce Department data.
Earlier this month, France's legislature gave final approval to a new tax on large tech companies, making it the first in a series of proposed national taxes on digital services being debated across Europe.
On July 10, U.S. Trade Representative Robert Lighthizer initiated an investigation against France, under the same broad law on which the Trump administration relied for its trade conflict with China, claiming the measure discriminates against American firms.
Under the law governing this process, Section 301 of the Trade Act of 1974, the USTR would have the ability to impose tariffs on anything and everything imported to the U.S. from France.
The legal process to impose the tariffs would take at least another month. The U.S. will hold a public hearing on Aug. 19 on any proposed action, with the public allowed to submit comments on the proposal through Aug. 26. After this comment period is complete, the U.S. could impose tariffs.
France has dismissed the U.S. trade threat, asserting that it is a sovereign state that makes sovereign decisions on tax matters.
The French measure applies a 3% tax on revenue that companies like Google or Amazon reap in France from such activities as undertaking targeted advertising or running a digital marketplace.
Following the president's tweet, the White House released a more detailed response.
"The United States is extremely disappointed by France's decision to adopt a digital-services tax at the expense of U.S. companies and workers," said spokesman Judd Deere. "France's unilateral measure appears to target innovative U.S. technology firms that provide services in distinct sectors of the economy."
"The Trump administration has consistently stated that it will not sit idly by and tolerate discrimination against U.S.-based firms," Mr. Deere added, referring to Mr. Lighthizer's investigation.
A spokeswoman for Mr. Macron declined to comment on Friday.
"Universal taxation of digital activities is a challenge that concerns everyone. We wish to reach an agreement on this topic as part of the G-7" and the Organization for Economic Cooperation and Development, French Economy and Finance Minister Bruno Le Maire said on Friday. "In the meantime, France will implement its national decisions," he added.
France, the U.S. and other countries are engaged in a complex, delicate negotiation over how to rethink corporate taxation in an increasingly digital age. Countries are trying to decide how to divide up taxing rights when companies have so much flexibility over where to book their profits.
The countries are trying to avoid unilateral measures like the French tax and a similar U.K. proposal, and France has said it would remove the tax when the countries reach a multilateral agreement.
The U.S. wants new rules that are focused on the digital economy, not tech companies, while European countries emphasize the importance of getting tax revenue from companies making substantial profits in their markets.
and Noemie Bisserbe contributed to this article.
Write to Vivian Salama at firstname.lastname@example.org and Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
July 26, 2019 15:07 ET (19:07 GMT)
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