After weeks of attacking some of the largest U.S. tech firms, President Donald Trump is ordering an investigation into France’s plans to hit big tech companies like Amazon, Apple, Google and Facebook with a hefty new tax that will cost them hundreds of millions of dollars.
The Section 301 investigation announced Wednesday could culminate in retaliatory tariffs, which could in turn lead to yet another trade war.
The digital-services tax, approved by the French Senate on Thursday, requires that tech firms with revenue of more than $845 million pay a 3% tax on sales in France beginning in 2019.
According to Business Insider, this would raise about $563 million in U.S. dollars, which French Finance Minister Bruno Le Maire said amounts to “justice.”
U.S. Trade Representative Robert Lighthizer’s office said it believes France is “unfairly targeting the tax” on U.S. companies, which led to the Trump call for an investigation.
“The United States is very concerned that the digital-services tax which is expected to pass the French Senate tomorrow unfairly targets American companies,” Lighthizer said Wednesday. “The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”
Under the trade act, the U.S. has the right to “respond to a foreign country’s unfair trade practices,” Lighthizer said, intimating that the U.S. could retaliate.
Le Maire said threats from the U.S. aren’t the way to move forward.
“I profoundly believe that between allies we can and should resolve our differences through means other than threats,” he said, according to Reuters. “France is a sovereign country which makes sovereign decisions about its tax regime and it will continue to make sovereign decisions about its tax regime.”
France implementing a digital-services tax also is a test case for the United Kingdom, which has announced a similar tax, which Boris Johnson, likely the next prime minister, said he supports.
Trump’s call for an investigation is an about-face from his recent attacks against America’s biggest tech firms, which he’s accused of bias against conservatives while hinting at antitrust lawsuits against companies like Google, Twitter and Facebook.