On Thursday, a tariff of 25% on $1.3 billion of French goods was announced by the Trump administration. The tariffs will affect items like handbags, soap, and cosmetics but neglects things like cheese and wine.
The new tariffs, set to take place in January of 2021, are the U.S.’ response to a 2019 French-imposed tax on technology, which directly impacts some American-owned companies. The French tax levies a new 3%t tax on companies that provide internet-based services to users in France. Companies such as Amazon (AMZN), Facebook (FB), Google (GOOG), and more are expected to be impacted by this tax. When the French tax was implemented in July of 2019, it retroactively applied to transactions from earlier in the year.
By setting the start date of the U.S. tariffs to begin in January of next year, it’s hoped that a resolution can be sought between now and then regarding the U.S.’ disapproval of the French technology tax; this follows the trade investigation conducted by the U.S. last year when the French tax was announced. The study was completed in December of 2019 and concluded that the tax was “unusually burdensome for affected U.S. companies.”
Following the French technology tax implementation, a pause with tax collection was put in place temporarily so that a better agreement between the two countries could be reached. Collection of the new tariffs by the U.S. has also been suspended.
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