Trade

What a Coincidence

JM Ashby
Written by JM Ashby

When French lawmakers began moving legislation to impose a small tax on digital services companies like Amazon, Microsoft, and Google, Trump threatened to impose tariffs on French goods in retaliation for a policy that he wrongly claims is unfair to American companies.

On Friday, Trump was more specific and suggested that he might impose tariffs on French wine.

“If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly,” Trump tweeted on Friday. “I’ve always said American wine is better than French wine!”

Later in the Oval Office, Trump told reporters the tax decision was wrong and he threatened the key French export.

“They shouldn’t have done this,” Trump said. “I told them, I said, ‘Don’t do it because if you do it, I’m going to tax your wine.’”

Taxing French wine wouldn't necessary mean sales of the Trump family wine would explode, but it certainly couldn't hurt by making the price of his wine seem more attractive compared to French wine that's subject to tariffs.

The idea that the French government doesn't have a right to tax services in their own country is completely unfounded. And by saying they don't have a right to do that, Trump is threatening French sovereignty while simultaneously giving French lawmakers all the reason they need to stand up for it.

Digital services companies are the most valuable companies on the planet with market values of literally a trillion dollars each and the fact that they're American companies is happenstance. Rich companies like Apple and Google service far more people outside of the United States than inside the United States; they're global companies with global responsibilities. And if they can't handle a small, negligible tax that only applies to specific digital services, they can choose not to operate in France.

If Trump does move ahead with tariffs on French wine, he will invite retaliation from the entire European Union because France is a member of the world's largest trading bloc and you cannot place tariffs on one member without placing tariffs on all of them.

It's not clear what legal authority Trump would hypothetically use to impose tariffs on wine unless he intends to claim that wine is a threat to "national security."

I personally believe our security would be enhanced if we all drank a little more wine.

  • muselet

    The affected tech companies have—publicly, at least—expressed no great concern over France’s 3% tax. Sure, they’d prefer a tax rate of 0%, but they clearly feel there’s no cause for alarm. Certainly there’s nothing here to cause a Rawr! Trump smash! reaction from the administration.

    US companies aren’t being targeted, incidentally. Digital companies—primarily those that use consumer information to sell online advertising—with annual global sales of €750 million and annual French sales of €25 million are subject to a tax on their activity within France. This will affect companies from China and Europe, as well as the US.

    But Donald Trump chose to throw a hissy fit, partly because it’s the only way he knows to react to countries behaving as if they were sovereign entities, and partly because he sees an opportunity to puff up one of his businesses (I’m not even slightly tempted to try Trump wine, mostly because history indicates the stuff will be made with the same care and craftsmanship as everything else Trump slaps his name, and a higher price, onto).

    I personally believe our security would be enhanced if we all drank a little more wine.

    Agreed.

    –alopecia