NEW YORK and PARIS (AP) — U.S. stocks fell sharply in early trading Tuesday after President Donald Trump cast doubt over the potential for a trade deal with China this year and threatened to impose tariffs on French goods.
Technology stocks led the losses. The sector is highly sensitive to twists in the trade dispute because many of the companies rely on China for sales and supply chains.
Trump said he has “no deadline” for a deal and didn’t mind waiting until after the election next year to make one. Investors had been hoping for a deal this year, or at least enough progress to stave off new U.S. tariffs on Chinese goods, including smartphones and laptops, scheduled to start Dec. 15.
Wall Street is also weighing the potential for an expanded series of trade disputes after a month of relative calm. On Tuesday, Trump proposed tariffs on $2.4 billion in French products in retaliation for a tax on global tech giants including Google, Amazon, and Facebook. That follows a threat Monday to raise tariffs on steel and aluminum from Argentina and Brazil.
France is bristling at the threat to slap 100% tariffs on French cheeses, Champagne and other products, with the French leader telling President Trump on Tuesday that the move would amount to an attack on all of Europe.
France’s reaction was swift and robust, with President Emmanuel Macron and his finance minister both warning of a European riposte if the U.S. measure is implemented.
“We’ll see where the discussions lead in the coming weeks, but it will involve a European response,” Macron said in a meeting with Trump on the sidelines of a NATO summit in London. “Because, in effect, it wouldn’t be France that is being sanctioned or attacked but Europe.”
The U.S. move is likely to increase trade tensions between the U.S. and Europe. Trump said the European Union should “shape up, otherwise things are going to get very tough.”
“I’m not in love with those (tech) companies, but they’re our companies,” Trump said ahead of his meeting with Macron.
French Finance Minister Bruno Le Maire said the U.S. tariff threat is “simply unacceptable. … It’s not the behavior we expect from the United States toward one of its main allies.”
He said the French tech tax is aimed at “establishing tax justice.” France wants digital companies to pay their fair share of taxes in countries where they make money instead of using tax havens, and is pushing for an international agreement on the issue.
The problem is pronounced in Europe, where a foreign company can pay most of its taxes in the one EU country where it has its regional base – often a small country like Luxembourg or Ireland that tries to attract multinationals with very low corporate taxes.
Le Maire noted that France will reimburse the tax if the U.S. agrees to the international tax plan.
He said France talked this week with the European Commission about EU-wide retaliatory measures if Washington follows through with the tariffs next month.
EU Commission spokesman Daniel Rosario said the EU will seek “immediate discussions with the U.S. on how to solve this issue amicably.”
The Office of the U.S. Trade Representative charges that France’s new digital services tax discriminates against U.S. companies.
Le Maire disputes that, saying it targets European and Chinese businesses, too. The tax imposes a 3% annual levy on French revenues of any digital company with yearly global sales worth more than 750 million euros ($830 million) and French revenue exceeding 25 million euros.
“What we want is a plan for international tax that is on the table” at the Organization for Economic Cooperation and Development, Le Maire said.
The U.S. investigated the French tax under Section 301 of the Trade Act of 1974 — the same provision the Trump administration used last year to probe China’s technology policies, leading to tariffs on more than $360 billion worth of Chinese imports in the biggest trade war since the 1930s.
Aamer Madhani, Zeke Miller, Darlene Superville, Paul Wiseman, Raf Casert, and Damian Troise contributed to this report.
Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Tagged with China, tariffs, trade