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Trump and Macron Call Truce on Tariff War, No Guarantees for the EU

On Monday, the French President Emmanuel Macron tweeted that he had a “great discussion” with Donald Trump that will “avoid tariff escalation” between the two countries. 

France had levied a three percent “digital services tax” on the French revenues of the world’s biggest tech companies, which are skilled at shifting profits to the lowest tax countries, frustrating politicians in countries where they do business. Most of these companies, such as Facebook and Google, are American. In December, the Trump administration announced proposed tariffs on $2.4 billion of French goods in response.

The proposed tariff list included a diverse list of consumer goods including Camembert, handbags, and all sparkling wine from France.

Bruno Le Maire, the French finance minister, was quoted in the Financial Times on Monday saying he had made “a certain number” of concessions to the United States in return for avoiding the tariffs on French goods. The concessions included delaying tax collection until a deal on digital tax is achieved within the broader context of the Organization of Economic Cooperation and Development. Several other countries have expressed a desire to also impose digital services on the world’s biggest tech companies.

Le Maire told French television LCI that “I won’t hide that this is very difficult, it’s one of the most difficult negotiations that I have led, it’s far from won.”

Earlier this month, the United States Trade Representative had a public hearing on the tariffs in response to the digital services tax. Although the tariffs affected only Champagne (and crémant), the wine industry showed up in force. 29 of 37 people who spoke to the committee were from the wine industry.

The reason for such over-representation was not a concern for Champagne, per se. Instead, speakers traveled to Washington to express their views on a parallel tariff action, one on a dispute over large civil aircrafts. This came to a head last October when the WTO ruled in favor of a complaint brought by the United States claiming that European countries illegally subsidized Airbus. The US then put in place tariffs on $7.5 billion worth of European goods, including a hodgepodge of wines. The rate was 25% on those wines, a rate many US importers found highly damaging but not catastrophic. (See previous W&S story, including perspectives from Rare Wine Co. and Kermit Lynch Wine Merchants, as well as Wilson Daniels)

On December 12, the US Trade Representative threatened to raise the tariff to 100% and extend it to all European wines, among other industrial and agricultural items.

Since there was no hearing for this further action in the large aircraft dispute, members of the wine trade showed up in force at the hearing on the digital services tax. Needless to say, if these tariffs go into effect, they will also encompass Champagne—so the celebratory corks are probably best left in the bottles for now.

There is cause for hope. As of January 1, there is a new trade commissioner for the EU, Phil Hogan. Hogan was in Washington, DC this week on a mission that was widely telegraphed as trying to “reset” the relationship and ease tensions with the US. After meetings with his counterpart, the US Trade Representative Robert Lighthizer, Hogan struck a conciliatory tone. The two will meet again this week in Davos, Switzerland on the sidelines of the World Economic Forum.

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Tags  Tariffs  Tariffs January 2020