Is Trump hoping that his threatened new tax on French wine might benefit his son’s poorly-reviewed Trump Winery in the vineyards of Virginia?
No one inside the lush halls of the Miraval winery, co-owned by Angelina Jolie and Brad Pitt with a French partner and located in Provence, wanted to answer that question this week. But the French receptionist who picked up the phone kept laughing. “C’est amusant,” she said.
What was so funny? The international catfight — call it the wine wars — between President Donald Trump and French President Emmanuel Macron that’s erupted over a new 3% tax to be levied on the revenues earned by big U.S. digital companies in France.
Trump was furious — or at least he pretended to be — by the so-called GAFA (stands for Google, Amazon, Facebook and Apple) tax and retaliated by threatening to impose tariffs on French wine which he called inferior to the American brand.
The U.S. has also launched a Section 301 investigation into France’s new digital tax, marking a new low in Franco-American relations.
"Always liked American wines"
“They shouldn’t have done this,” Trump said. “I told them, I said, ‘Don’t do it because if you do it, I’m going to tax your wine.'”
He added, “I’ve always liked American wines better than French wines—even though I don’t drink wine.”
Trump called Macron out for his “foolishness” in enacting the tax and the French Agricultural Minister Didier Guillaume fired back on local TV a few days later.
“It’s absurd, in terms of having a political and economic debate, to say that if you tax the ‘GAFAs’, I’ll tax wine. It’s completely moronic,” Guillaume told BFM TV. “American wine is not better than French wine,” he added.
"Grape jelly"
Some suggested that Eric Trump’s vineyards in Charlottesville could benefit if the president slaps a tax on French wine. However, Trump Winery was savaged in a Vanity Fair review that described the wine taste as “Welch’s grape jelly with alcohol.”
It’s unlikely, then, that Trump wine will get a boost over French wines like the Jolie-Pitt Miraval rosé, a shock bestseller in the U.S. since it was rolled out in 2012 and now consistently ranked one of the best wines in the world.
“French wine is sold as a premium,” said Rémi Bourgeot, an economist at IRIS, the French Institute for International and Strategic Affairs. “Even if Trump targets it, he won’t have that much of an impact. People aren’t going to stop buying French wine.”
A smokescreen
Bourgeot said that the wine kerfuffle may actually be a smokescreen for Trump’s more overarching ambitions in his trade wars with Europe.
For one thing, Trump has no right to be angry at Macron. America’s Big Tech gets away with information highway robbery in countries like France. They avoid paying the same taxes as local companies via complicated, shady-sounding schemes that European economists like to call “financial engineering” but which are all legal, thanks to the European Union’s lack of a unified tax code.
Certain countries, notably Luxembourg and Ireland, offer bargain corporate taxes of between 10% and 14% to woo big US digital and multinational companies.
Facebook, Google, Apple and Airbnb, among others, have their European headquarters in Dublin or Cork. Since 2003, Amazon Europe has been based in Luxembourg, once called the “financial secrecy death star” by the Tax Justice Network. So Amazon gets to sell products in France, but it avoids the roughly 32% French corporate income tax by going through Luxembourg.
Trump knows this, said Bourgeot, who believes his real goal is to force the EU to reduce the German trade surplus and lower trade barriers between the U.S. and Europe.
“The real issue is the German trade surplus, especially German cars,” Bourgeot said. “It’s caused a big imbalance in Europe but every time Trump criticizes the Germans, Macron defends them. So now he’s leaning on Macron by threatening a wine tax over GAFA. This is all very tit for tat trade bargaining. Trump’s base may applaud him for taxing French wine but he’s got ulterior motives. He’s been focusing on China but those of us in Europe knew we were next in line.”
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