The U.S. government on Monday said it may slap punitive duties of up to 100% on $2.4 billion in imports of French Champagne, handbags, cheese and other products, after concluding that France's new digital services tax would harm U.S. tech companies.
"France's digital services tax discriminates against USA companies", the office of the United States Trade Representative said in a statement Monday.
Shares in French luxury companies fell in response to the tariff threat against French champagne, handbags, cheeses and other products.
The USTR is accepting public comment until January 6, 2020, with a public hearing to be held on January 7.
An official at the French Finance Ministry declined to comment and said Minister Bruno le Maire would speak on the matter Tuesday.
The US has separately prepared to broaden tariffs against the European Union bloc as part of a long-running dispute over aircraft subsidies.
Lighthizer warned that the U.S.is also exploring whether to pursue Section 301 investigations into digital taxes introduced by Austria, Italy and Turkey.
The French tax is created to prevent tech companies from dodging taxes by putting headquarters in low-tax European Union countries.
President Trump is scheduled to meet with French President Emmanuel Macron in London on Tuesday on the sidelines of a North Atlantic Treaty Organisation leaders meeting.
The USTR report "concluded that France's Digital Services Tax (DST) discriminates against US companies, is inconsistent with prevailing principles of global tax policy, and is unusually burdensome for affected US companies".
The United States has already imposed 25pc duties on French wine and cheese as part of its WTO-sanctioned response to illegal European Union aircraft subsidies, a move exporters warned would penalise USA consumers while severely hurting French producers.
Earlier this year, France voted in favor of a new tax on tech giants. While most of the roughly 30 businesses affected are American, the list also includes Chinese, German, British and French companies.
The U.S. move is a setback for efforts to stop a conflict over digital tax from intensifying.
French junior economy minister Agnes Pannier-Runacher told Sud Radio that France would be "pugnacious" in its dealings with the United States on the matter, and that France would not back down on its digital tax plans.
The decision to pursue tariffs "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", U.S. Trade Representative Robert Lighthizer said.
France's 3% levy applies to revenue from digital services earned by firms with more than 25 million euros ($27.86 million) in French revenue and 750 million euros ($830 million) worldwide.
"What we want is a plan for global tax that is on the table" at the Organization for Economic Cooperation and Development, Le Maire said.