The Trump administration said on Monday, Dec. 2, that digital services tax (DST) from France discriminates against U.S. companies and it proposed that the U.S. will impose up to a 100% tariffs on billions of dollars of French products in response to the French digital tax law. 

The Office of the United States Trade Representative (USTR) said France’s digital tax “discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. Specifically, USTR’s investigation found that the French DST discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon. In addition, the French DST is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing particular U.S. technology companies.”

In July, French President Emmanuel Macron signed a law placing a 3% tax on revenues from large digital services companies. 

USTR later announced that it would open an investigation into the French digital tax to find out whether the tax posed a discriminatory or unreasonable treatment toward U.S. companies and burdens U.S. trade. The investigation was conducted under section 301 of the U.S. Trade Act of 1974.

“In determining the appropriate action, the U.S. Trade representative may take into account the level of harm to the U.S. economy caused by France’s DST. USTR seeks public comments on the level of harm, including DST payments owed by U.S. companies, the annual growth rate of such payments, and other effects, such as compliance costs,” USTR said in a statement.

 “The Annex to this notice contains a preliminary list of 63 tariff subheadings, with an estimated import trade value for calendar year 2018 of approximately $2.4 billion. The U.S. Trade representative proposes to draw up a final list of products subject to additional duties from this preliminary list,” the statement read.

U.S. Trade Representative Robert Lighthizer said in a statement: “USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies. Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”

Large tech companies welcomed the USTR’s conclusion on Monday night. Jordan Hass, director of trade policy for the Internet Association and represents Amazon, Google, Facebook and other Internet companies,  said, “Today USTR is defending the internet, which is a great American export.” 

“Discriminatory digital services taxes act as a trade barrier for innovative American companies and small businesses often face the biggest burden from them,” Hass said.