France warns U.S. of fast trade retaliation but hopes for truce

France warned the U.S. that retaliation will come fast if Washington puts more tariffs on French products and escalates a digital tax dispute between the two countries.

But French Finance Minister Bruno Le Maire also said in Paris Friday that he sees a possible compromise with the Americans that avoids a broader transatlantic trade war.

“If there is no compromise we will continue to apply our national tax,” he said. “If there are U.S. sanctions against our tax, which is not discriminatory — it also hits Chinese and European companies — we can count on the support of the European Commission and other EU states. If there are sanctions against France, the EU would react fast and strongly.”

The Trump administration is threatening to hit $2.4 billion of French products with import taxes in response to a 3% tax France instituted on the digital revenue of large tech companies including Google, Apple, Facebook and Amazon. Among the products targeted with duties of as much as 100% are luxury items like wine, cheese and makeup. One American wine merchant called it the biggest threat to the industry since Prohibition a century ago.

The EU’s chief trade negotiator, Ireland’s Phil Hogan, just wrapped up a trip to the U.S. capital where he showed can match the Trump administration’s tough talk. He called President Donald Trump “obsessed” with the goods trade deficit between the two trading partners as he focuses on re-election in November. Transatlantic trade in goods and services is worth more than $3 billion a day, according to Hogan.

“Sounds like a fairly healthy relationship to me,” he said Thursday in Washington. “So why put tariffs on these EU products to make them more expensive for your people?”

It sets up a showdown in the Swiss Alps between Le Maire and U.S. Treasury Secretary Steven Mnuchin, who set a deadline to resolve the disagreement around the middle of next week. They’re planning to talk Wednesday on the sidelines of the World Economic Forum’s meeting next week in Davos.

Also on the attendee list at the annual gathering of global elites: Trump himself, fresh from signing a deal with China, and scheduled to speak Tuesday before crowds of multilateralists he regularly critizises. Just two months ago called the 28-nation EU “terrible. In many ways, worse than China” on fair trade.