US and France postpone sparkling wine tax until the end of 2020

Hot on the heels of a “Phase One” agreement between the US and China, President Trump and French President Macron have agreed to suspend talk of the 100% tariffs on French sparkling wine that the US Trade Representative proposed on $2.4 billion in imports from France in retribution for the French digital services tax. That tax on some wines could top 100% as many European products are already taxed at 25% in response to the WTO Airbus decision. These taxes are expected to reduce wine sales overall by 2% which would cost the economy $2 billion and 17,000 jobs, with an overall cost for the complete European tariffs costing $10 billion in lost revenue, 78,000 jobs lost.

Currently the US is France’s largest importer of wine, and consumers aren’t likely to switch brands and types in light of the tariffs, so analysts expect an across the board reduction in consumption. The French government announced the initial tariffs against US technology companies based on their annual revenue. While the taxes are on hold for now, the negotiations will continue between the US and France until an equitable solution of tariffs for digital taxes. The negotiations will not impact the current 25% tariffs on European wines that are currently being applied in response to the WTO Airbus decision.

The WTO is currently deciding a very similar case against the US and Boeing that could result in a wash between the countries instead of a tit-for-tat increasing of taxes, benefiting nobody. This extension of time between the nations to negotiate could result in shortages and disruptions of cycles as more people buy up their favored products before any possible tariffs go into effect, a phenomenon seen during the escalating US-China tariff disputes that led to a lower than average holiday shipping season.