Donald Trump has threatened to retaliate with a tariff on French wine. He tweeted, “France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”
Earlier this month his administration opened an investigation into the tax it claims “unfairly targets American companies”.
The French government plans to introduce the tax in 2020, with large digital companies such as Facebook, Amazon and Uber among those that will be affected.
The 3% tax is targeted at businesses with a worldwide digital revenue of at least €750m (£674.3m) and French revenue of more than €25m. It is "fiscal justice” for companies accused of not paying their fair share, according to France finance minister Bruno Le Maire.
It has angered the US government, however, which has ordered a Section 301 probe to determine if the levy poses an unfair trade practice.
Under the Trump administration the US has become increasingly aggressive on trade and is currently embroiled in trade skirmishes with China and the EU.
In his most recent Budget, former UK chancellor Philip Hammond announced the implementation of a similar 2% digital services tax due to come into effect from April 2020.
Germany, along with France, has previously pushed for such a tax to be implemented, but other nations are reticent as this could hurt innovation and keep multinationals away from their countries.