Like most major international developments these days, word first came in a tweet: "Great discussion with @realDonaldTrump on digital tax," wrote French President Emmanuel Macron yesterday. "We will work together on a good agreement to avoid tariff escalation."
U.S. President Donald Trump responded with his own tweet: "Excellent."
The brief exchange could save American wine consumers from paying through the nose for some of their favorite bubblies. French officials announced that the U.S. government has agreed to hold off on 100 percent tariffs on French luxury goods, including handbags, cheese, Le Creuset cookware and sparkling wine as retaliation for France's tax on large global technology firms. These officials say the Trump administration will hold off on the tariff increases while negotiations over the tax continue at the Organization for Economic Cooperation and Development (OECD).
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The White House issued a statement Monday that said Trump spoke with Macron and "agreed it is important to complete successful negotiations on the digital services tax." But it did not confirm he would hold off on tariffs for now.
The sparkling spat stems from France's digital services tax, which imposes a 3 percent tax on firms with more €750 million in global revenue, and €25 million in revenue in France. The Trump Administration argues the tax unfairly targets American Internet companies. The French government argues that big international tech firms are profiting off of French consumers but not paying sufficient taxes. The Office of the U.S. Trade Representative (USTR) announced plans in early December to impose 100 percent retaliatory duties on as much as $2.4 billion worth of French goods, including all sparkling wines.
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At two days of hearings earlier this month, lobbyists for the tech firms argued the tariffs were painful but necessary to warn other nations who are considering similar taxes. More than two dozen wine importers, retailers and distributors told the USTR and other federal officials that the tariffs would devastate their businesses and result in the loss of thousands of jobs.
While there's hope on the sparkling wine front, Monday's progress was unrelated to a bigger wine trade war. The USTR has already imposed 25 percent tariffs on many European wines in a battle over subsidies from European governments to airplane manufacturer Airbus. The Trump administration is considering raising those tariffs to 100 percent and applying them to all European wines, which would devastate importers, distributors, retailers and restaurants. A decision could come any day.
As for the sparkling spat, a final deal is far from complete. In interviews yesterday, French Finance Minister Bruno Le Maire said that he had agreed to hold off on collecting the digital services tax until an international agreement is negotiated with the OECD. He said talks with his American counterparts continue. "I won't hide that this is very difficult," he told French TV network LCI. "It's one of the most difficult negotiations that I have led. It's far from won."
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