USA proposes tariffs on French products following France's digital tax

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Gruyere cheese, also spared from the USTR aircraft tariffs levied in October, featured prominently in the list of French products targeted for 100% duties, along with numerous other cheeses. It warned that other countries that have introduced digital services taxes, including Italy, Austria and Turkey, could also face a similar investigation.

U.S. Trade Representative Robert Lighthizer said the U.S. government was also exploring whether to open similar investigations into the digital services taxes of Austria, Italy and Turkey.

Amazon retaliated to the new tax by raising fees for French businesses by 3%.

The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying. An official at the French Finance Ministry declined to comment and said Minister Bruno le Maire would speak on the matter Tuesday.

France has been one of the most vocal governments to push for taxes to be paid, based on digital activity, not where companies have their headquarters. The two struck a compromise in August at a G7 summit in France that would refund USA firms the difference between the French tax and a new mechanism being drawn up through the Organization for Economic Cooperation and Development.

There were signs of progress in recent weeks when the OECD proposed a "unified approach" to merge proposals that differed over whether to single out digital companies or have a broader approach.

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"Having demanded an global solution from the OECD, it (Washington) now isn't sure it wants one", Le Maire told France Inter radio.

"The French digital services tax is unreasonable, protectionist and discriminatory", Senators Charles Grassley and Ron Wyden, the top Republican and Democrat, respectively, on the Senate Finance Committee, said in a joint statement.

"We can see that the United States is shifting into reverse".

The French tax, enacted earlier this year, imposes a three percent levy on the revenues earned by technology firms in France, which often come from online advertising and other digital services.

It will apply to any digital company with sales of more than €750m (£670m, $850m), in which 30 companies are expected to be affected.

The French tax targets revenue instead of profits, which are often reported by tech giants in low-tax jurisdictions like Ireland in a practice that has enraged governments. But Margrethe Vestager, now the EU's antitrust chief, said last week the bloc would try to find unity again if there isn't a global agreement. Italy's government has said it will implement a tax on digital revenues January 1, and Boris Johnson's conservative party, which leads the polls in the United Kingdom election, has committed to a digital services tax.

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