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Good News for French Handbags: US Suspends $1.3B in Tariffs

The U.S. Trade Representative (USTR) said Thursday that it would suspend the tariff action stemming from a probe of France’s digital services tax.

The tariffs on $1.3 billion of French goods were slated to go into effect on Jan. 6. The U.S. in July formalized duty actions following a dispute with France after it implemented a 3 percent digital services tax (DST) in 2019 that the U.S. believes was aimed at American tech firms that include Amazon, Facebook and Google parent Alphabet. France and the U.S. agreed to suspend collection of its tax so the two parties could work out a resolution, mostly with an eye toward implementing a multilateral taxation framework, but that changed when the U.S. in June pulled out of O.E.C.D. talks on international taxation and last month France decided to resume collections on its tax.

The American duty, if implemented, would have taxed items such as cosmetics and handbags, as well as champagne and cheese. The U.S. was initially looking at imposing a 100 percent tariff on up to $2.4 billion of French goods.

The USTR said Thursday that it decided to suspend the tariffs because of ongoing probes of similar DSTs that have either been adopted or are under consideration in ten other jurisdictions. “Those investigations have significantly progressed, but have not yet reached a determination on possible trade actions.  A suspension of the tariff action in the France DST investigation will promote a coordinated response in all of the ongoing DST investigations,” the USTR said. Those other countries include the U.K., Italy, and India.

DSTs have become a favored way for countries to build up their coffers by using it as one way to raise revenue.