Trump on course for new trade war with France

US 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. As Business Insider writes, the probe, known as a Section 301 investigation, was announced Wednesday night by US Trade Representative Robert Lighthizer. It could culminate in retaliatory tariffs, which might open up a new trade war.

France’s digital-services tax, which was approved by the French Senate on Thursday, would require tech firms with revenue of more than $845 million to pay a 3% tax on their French sales.

This could raise about €500 million, or $563 million, for the French public purse every year, which French Finance Minister Bruno Le Maire has said would amount to “justice.” Taxing revenue is meant to counter the complex arrangements most US tech firms have in place to avoid paying high taxes on their profits.

Lighthizer’s office said it had reason to believe that France was “unfairly targeting the tax” on US companies. As a result, Trump has 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 Wednesday. “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 US has the authority to “respond to a foreign country’s unfair trade practices” under the trade act, Lighthizer’s office said, suggesting it could decide to hit back at the French tax.

Action against Europe would not be unprecedented for the US president, who imposed tariffs of 25% on European steel and 10% on aluminum in May last year. The US is also fighting a trade war with China, and trade tensions are brewing between the US and India. “Trump preps for a trade war with France,” was the conclusion of the New York Times economic-policy reporter Alan Rappeport.

Le Maire on Thursday said threats for the US were not the answer. “I profoundly believe that between allies we can and should resolve our differences through means other than threats,” he said, per Reuters. “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.”

UK plans almost identical tax

France’s digital-services tax could be seen as a test case for other European countries to introduce similar tax regimes. The UK, for example, has announced an almost identical plan, which Boris Johnson, the likely next UK prime minister, has indicated his support for.

Trump’s call for an investigation marks a change in tone for the president, who has spent weeks accusing America’s biggest tech firms of bias against conservatives bias and hinting at antitrust grievances. He has even threatened to sue firms like Google and Facebook.