Trump could open up a new trade war with France over plans to slam US tech firms with giant new taxes

Trump MacronFrench President Emmanuel Macron speaks with President Donald Trump ahead of a meeting at the Prefecture of Caen, on the sidelines of D-Day commemorations marking the 75th anniversary of the World War II Allied landings in Normandy, France, June 6, 2019.Ludovic Marin/Reuters

  • US President Donald Trump has ordered an investigation into French plans to tax tech firms hundreds of millions of dollars.
  • Trump is worried that France's digital services tax, which would place a 3% levy on the French revenues of firms like Amazon, unfairly targets US companies.
  • The US could retaliate against the tax, potentially sparking a new trade war with France.
  • Trump's move marks something of a change in tone for the president, who has spent weeks attacking America's biggest tech firms.
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US President Donald Trump has ordered an investigation into French plans to slam big tech companies, like Amazon, Apple, Google, and Facebook, with giant new taxes.

The probe, known as a Section 301 investigation, was announced on Wednesday night by US Trade Representative Robert Lighthizer. It could culminate in retaliatory tariffs, potentially opening up a new trade war.

France's digital services tax, which is expected to win approval on Thursday, would require tech firms with revenues of more than $845 million to pay a 3% tax on their French sales.

This could raise about €500 million, or $563 million, for the French public purse every year, which French Finance Minister Bruno le Maire has said would amount to "justice."

Taxing revenue is meant to counter the complex arrangements most US tech firms have in place to avoid paying high taxes on their profits.

Lighthizer's office said it has reason to believe that France is "unfairly targeting the tax" on US companies. As a result, Trump has called for the investigation.

Read more: Tech's tax bombshell: Internet giants face billions more in taxes in Europe as regulators demand 'justice'

"The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies," said Lighthizer.

"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."

The US has the authority to "respond to a foreign country's unfair trade practices" under the trade act, Lighthizer's office said, suggesting it could decide to hit back at the French tax.

Action against Europe would not be unprecedented for the US president, who imposed a 25% tariff on European steel and 10% on aluminum imports in May last year.

"Trump preps for a trade war with France," was the conclusion of New York Times economic policy reporter Alan Rappeport.

France's digital services tax could be seen as a test case for other European countries to introduce similar tax regimes. The UK, for example, has announced an almost identical plan, which Boris Johnson, the likely next UK prime minister, has indicated his support for.

Trump's call for an investigation marks a change in tone for the president, who has spent weeks attacking America's biggest tech firms over their perceived liberal bias and potential antitrust issues. He has even threatened to sue firms like Google and Facebook.

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