French wine, cheese targeted in latest Trump trade fight

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Industry groups are sounding the alarm on President Trump’s proposal to hit $2.4 billion in French goods with tariffs, warning that the latest trade salvo will affect a broad array of goods and its effects fall on U.S. consumers and small businesses.

The administration has proposed tariffs on a wide number of French products, including cheese, sparkling wine and Champagne, beauty products, handbags and home goods, in retaliation for a French tax on online services that targets American tech giants such as Google and Amazon.

Trade watchers warned the scope of the tariffs would be broad and lead to stark price hikes for consumers.

In 2018, the average tariff rate on French imports was 2.9 percent, according to the National Retail Federation (NRF). Under Trump’s tariffs, new taxes could be up to 100 percent for many goods.

The trade between the two countries is significant. In 2018, the U.S. imported more than $700 million in wines, including sparkling wines like Champagne, and more than $200 million in dairy products such as cheese, according to the NRF.

But trade watchers say it’s not just food products, with France also a major supplier of luxury goods and beauty products to the U.S. The U.S. imported more than $950 million worth of French cosmetics and more than $400 million worth of handbags, the NRF said. Homeware products such as porcelain or fine china from France could also be hit by Trump’s new tariffs.

And the effects will be felt by more than just consumers, industry groups warn.

“Importers in many cases are small and medium-sized companies providing solid middle-class jobs in their local communities. These tariffs pose cost burdens on these United States companies that result in job losses,” Robert Tobiassen, president of the National Association of Beverage Importers, told The Hill.

“More tariffs will only hurt these businesses more,” Tobiassen added, saying that his group is urging the parties in the fight over digital taxes and a separate trade dispute about European subsidies for aircraft manufacturer Airbus to “negotiate and reach a settlement of these matters quickly.”

Amy Smith, policy adviser at Arnold & Porter, said the administration wouldn’t move forward with any tariffs until the new year, sparing consumers during the crucial holiday shopping season.

“Thank goodness that nothing would happen until January, because a lot of these things at least could be spared in the holiday shopping season and for related celebrations,” she said.

But she added that affected companies likely wouldn’t have much time.

“There’s less than a month to get comments in and then just a couple of weeks more to give public testimony or to rebut public testimony, and then tariffs could be implemented pretty much immediately,” Smith said.

“So there really isn’t much time for companies to change their supply chains or to renegotiate contracts. They would have to suck up price differences or pass on to consumers, or both.”

Many industry groups were quick to criticize the administration’s planned tariffs

The Wine & Spirits Wholesalers of America (WSWA) told The Hill they oppose tariffs on European Union wine and spirits.

“These tariffs could impact consumers of French wine across all spectrums and price points,” said Michael Bilello, WSWA senior vice president of communications and marketing.

Bilello worried about the impact when the wine industry is already facing new challenges, noting that wine sales are currently down compared to spirits. And he worried that it could further discourage sales to millennials, “a group already choosing White Claw and various spirits over wine for various reasons, one being price.”

But some industry groups downplayed the tariffs on French products, which could provide a boost for U.S. competitors.

The International Dairy Foods Association (IDFA) said the U.S. imported $191 million in cheese from France in 2018, with these year’s numbers at the same level.

“Overall, Americans love cheese and consume more and more each year,” Matt Herrick, the IDFA’s senior vice president of executive and strategic communications, told The Hill.

But Herrick added that the vast majority of cheeses consumed in the U.S. are American-made and that the U.S. is one of the world’s largest exporters of cheese.

“This year’s World Cheese Awards in Italy awarded the top cheese in the world to an American brand—Rogue River Blue from Savencia Cheese USA. Europeans used to dominate these contests—no more,” Herrick said.

Smith acknowledged the tariffs could win over American consumers for some U.S. based-producers, but cautioned that companies had more to worry about if France retaliated.

“If American companies are then retaliated against by France for additional tariffs put on similar products of theirs, that is really going to hurt jobs here. And consumers are going to feel it,” she said.

The administration has defended its move, arguing that France’s tax on digital services is unfairly intended to target Silicon Valley.

“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” U.S. Trade Representative Robert Lighthizer said Monday in announcing the move.

The U.S. tech industry has also pushed back on the digital tax, and the issue is one of the few that has seen them allied with Trump. Tech companies arguing that regional or country-by-country taxes will result in double or triple taxation for their services.

“The tech companies you’re talking about, they’re not my favorite people because they aren’t exactly for me, but that’s OK,” Trump said Tuesday at the NATO summit in London. “I don’t care. They’re American companies. And we want to tax American companies. … We want to tax them. That’s not for somebody else to tax.”

But France has defended its tax, arguing that tech giants who offer services in multiple countries need to be taxed more effectively. And France is not alone — other countries have imposed or are weighing digital taxes as international negotiators struggle to reach a global framework on how to tax tech companies.

The fight is likely to escalate. France on Tuesday threatened to retaliate, with Finance Minister Bruno Le Maire calling the move “unacceptable.” The U.S. trade representative’s office is already preparing to open investigations into other countries that have similar tech industry taxes.

The effects of Trump’s tariffs are nothing new to businesses, as the president has launched trade fights with both U.S. allies and economic adversaries.

Trump has already placed tariffs on European goods, including on French wine, Italian cheese and Scotch whisky, in retaliation for subsidies to Airbus.

Industry executives worried about the fallout from the French tariffs on broader trade talks.

“Although there are many more details to be learned about potential tariffs on French products entering the United States, additional tariffs will further strain the trade relationship between the United States and the EU, making it even more difficult for our countries to negotiate a free trade agreement,” Herrick said.

Updated at 10:30 a.m.

Tags digital services tax Donald Trump European Union France French wine Robert Lighthizer Silicon Valley Tariffs

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