On Monday, US President Donald Trump proposed set import taxes on $2.4bn worth of French goods in response to France’s digital tax that’s impacting US tech giants.
France’s Finance Minister Bruno Le Maire criticised the US government’s threats to impose tariffs telling a French radio station that the EU would be ready to issue a strong response and called them "unacceptable."
"This is not the behaviour we expect from the United States vis-a-vis one of its principal allies, France, and, in a general manner, Europe," Le Maire noted.
Trump said that he won’t let people take advantage of American companies.
"If anyone is going to take advantage of American companies, it's going to be us. It's not going to be France," the US president said while attending the NATO leaders summit in London.
But later that day Trump played down his own threats.
"We do a lot of trade with France and we have a minor dispute. I think we'll probably be able to work it out," Trump told reporters after talks with French President Emmanuel Macron at the NATO gathering. "I am sure within a short period of time things will be looking very rosy, we hope. That’s usually the case between the two of us, we get it worked out."
Trump has earlier criticised France for unfairly targeting US companies such as Google, Amazon, Facebook and Apple after France in July introduced an annual 3 per cent levy on companies with more than €750 million in revenue globally and more than €25 million in revenue in France.
Thomas Prusa, Professor of Economics at Rutgers University, believes that it’s usually hard to predict whether Trump will follow through with his tariff policies, but when it comes to France it is likely just tough talk:
"With respect to the threatened 100% tax on French wine, I think it is more likely bluster than a policy that will be implemented. Will he really tax his rich Mar-a-Lago buddies? Doubtful," the professor said.
The expert also said that Trump’s tariff policy is ineffective.
"Trump’s willingness to bend trade rules to satisfy his domestic political agenda is unprecedented in modern times. Ample evidence now exists that Trump’s tariffs are not being paid by foreign suppliers but by American taxpayers. His tariff policy is the equivalent of billions of dollar of new taxes on Main Street Americans. And what have these taxes produced? Nothing. Trump’s trade policy will go down in the history books as one of the great examples of policymakers failing to understand basic economics," Prusa said.
Daniel Ives, managing director of equity research at Wedbush Securities in New York, says that tariffs will primarily hurt US consumers.
"This is another escalating tariff battle as the French digital tax continues to be a head-scratcher in the eyes of the Valley and from the Trump administration. This is a major shot across the bow as the French digital tax situation has not been altered and the US will retaliate accordingly. Unfortunately, it’s the consumers that lose in the US given the increased expense for cheese, champagne and other French items," he explained.
