French luxury stocks are reported to have dropped on November 3 after the U.S. President, Donald Trump, threatened to impose further tariffs on US$2.4 billion worth of French products, including handbags, wine, cheese, cosmetics and other key exports. Shares in French luxury conglomerates LVMH and Kering were reported to have dropped about 2% upon the announcement, while Hermès shares were trading 2.6% lower.

The hike in tariffs is said to be in retaliation to France’s new digital services tax, effective in early 2020. To be applied retroactively, the ‘Gafa tax’ is a 3% tax on digital-service revenues earned in France by U.S. tech giants such as Google, Amazon, Facebook and Apple and includes targeted online advertising, the sale of data for advertising purposes and the linking of Internet users through these platforms. France said the tax is temporary, until an international solution is found, but the U.S. government claims the tax is “discriminatory” against U.S. companies.

However, France is not the only country being target by the U.S. for higher taxes; Austria, Italy and Turkey are also said to have been singled out by the U.S. administration. Meanwhile, Bruno Le Maire, France’s Finance Minister, described the tariff threat is “simply unacceptable”, and threatened a “strong European riposte” if the Trump administration goes ahead with the imposition.

Sources: Le Figaro/Business Insider