French Luxury stocks took a hit after the Trump administration proposed tariffs against the European country in response to its new digital service tax that would hurt U.S. companies.
The Trump administration proposed “additional duties of up to 100 percent” on $2.4 billion of French products that would include wine, cheese, and other goods, the U.S. Trade Representative (USTR) said in a statement on Monday. After the announcement, French luxury brands saw a drop in stocks, reported Business Insider.
Shares in LVMH, Christian Dior, Kering, and Hermes dropped almost 3 percent on Tuesday, with Hermes taking the biggest dive at 2.6 percent. LVMH, the brand behind Louis Vuitton, suffered a loss of 2 percent.
LVMH is behind major luxury brands and subsidiaries including Louis Vuitton, Celine, Givenchy, Marc Jacobs, Bvlgari, Tiffany & Co., and more.
The move comes after France in July imposed a 3 percent tax on American tech companies that is set to go into effect in early 2020. The digital service tax would affect Google, Apple, Facebook, and Amazon, the USTR said.
The USTR said that an investigation into France’s Digital Services Tax (DST) concluded that the policy is “unreasonable, discriminatory, and burdens U.S. commerce,” saying in a statement that it’s “inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies.”
“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,” said Ambassador Robert Lighthizer.
Lighthizer added that the “USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”
The USTR said it is also considering whether to open investigations into the digital services taxes of Austria, Italy, and Turkey.
French Finance Minister Bruno Le Maire said Tuesday on Radio Classique that the U.S. tariff threat is “simply unacceptable” and threatened a “strong European riposte” if the Trump administration follows through with the tariffs. He said France has talked with the European Commission about EU-wide retaliatory measures and claims that the French tech tax is not discriminatory against the United States because it targets European and Chinese companies too.
The Associated Press contributed to this report.
