When French President Emanuel Macron announced at the G7 meeting in Biarritz that a compromise had been reached with the United States over his country’s new tax on services provided by big tech firms, President Donald Trump — who had threatened to place a tariff on French wine in retaliation — said nothing.
Despite the supposed agreement, the Trump administration has told the tech industry it is simply holding off on any retaliatory tariffs on France for up to 90 days, according to several people familiar with the matter. Multiple sources said Macron’s announcement dressed up as a done deal what is essentially a pause.
In other words, a trade showdown with France may still be looming.
The trade dispute between the two countries kicked off last month as France moved forward with a new 3% tax on the revenue that large tech companies generate from their digital businesses, such as by collecting vast amounts of user data and selling targeted advertising. In response, the US launched a trade investigation and Trump threatened to tax French wine.
France has argued that large multinational players don’t pay enough taxes in the country even though these companies have significant operations there. Meanwhile, Trump and businesses like Google (GOOGL) and Amazon (AMZN) have said the tax unfairly targets American companies.
But, standing alongside Trump at Monday’s press conference, Macron made it seem as though all was well. Under the terms of the compromise, which Macron touted as “a very good agreement,” France would repay companies the difference between its digital tax plan and whatever comes from a new global tax overhaul being drawn up by the Organization for Economic Cooperation and Development (OECD).
“On this digital tax, we have worked a lot bilaterally and have reached an agreement to overcome these hurdles,” Macron said.
Even at the press conference, there were hints that the matter wasn’t entirely settled. A French reporter noted that US First Lady Melania Trump had been spotted drinking French wine.