France and EU ready to fight back over U.S. tariff threat, ministers say

France and the European Union are ready to fight back over the latest U.S. tariff threats on French products, French government ministers said on Tuesday.

On Monday, the U.S. government said it may impose punitive duties of up to 100% on $2.4 billion of imports from France, including champagne, handbags, cheese and other products, after concluding that France’s new digital services tax would harm U.S. tech companies.

French Finance Minister Bruno Le Maire described the U.S. proposals as “unacceptable”. “In case of new American sanctions, the European Union would be ready to riposte,” Le Maire told Radio Classique.

French junior economy minister Agnes Pannier-Runacher told Sud Radio that France would be “pugnacious” in its dealings with the U.S. on the matter, and that France would not back down on its digital tax plans.

France’s 3% levy applies to revenue from digital services earned by companies with more than 25 million euros ($27.86 million) in French revenue and 750 million euros ($830 million) worldwide.

But the U.S. Trade Representative’s office said on Monday that its investigation found that the French tax was “inconsistent with prevailing principles of international tax policy”.

It said it found the French tax proposal “unusually burdensome for affected U.S. companies,” including Alphabet Inc’s Google (GOOGL.O), Facebook Inc (FB.O), Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O).

The latest ruling by the U.S. government knocked down leading French luxury-goods stocks. Shares in LVMH (LVMH.PA), Kering (PRTP.PA) and Hermes (HRMS.PA) fell 1.4% to 1.5% in early trading.

“It’s too risky to go into the luxury sector. The sector was hit first of all by the Hong Kong protests, and now this will hit it even more,” said Clairinvest fund manager Ion-Marc Valahu.

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