President Trump is threatening to blow up transatlantic trade over a tax that most Americans have never heard of. On June 15, he warned French President Emmanuel Macron that the US would impose a 100% tariff on French wine and champagne unless France repeals its digital services tax, a 3% levy targeting major US tech companies.

Macron’s response: no. France will not abandon the tax.

What the digital services tax actually is

France enacted its DST back in 2019, making it one of the first countries to directly tax the digital revenues of large tech firms.

The tax applies a 3% levy on digital revenues from companies that exceed €750 million in global revenue and €25 million in French revenue. In English: it’s designed to hit the Googles, Amazons, and Metas of the world, companies that generate enormous revenue in France but historically paid relatively little in local taxes thanks to creative corporate structuring.

The US government has consistently argued that these taxes are discriminatory because they disproportionately target American firms. European policymakers counter that the taxes simply ensure tech giants pay their fair share where they earn money.

The US Trade Representative previously launched Section 301 investigations into DSTs, the same legal tool used to justify tariffs on Chinese goods. Trump’s February 2025 presidential memorandum formally kicked off reviews of potential retaliatory measures against DSTs and related EU regulations, setting the stage for this week’s escalation.

Why wine and champagne are the targets

French wine and champagne exports to the US are valued at over $2 billion annually, making the US one of France’s most important markets for its signature luxury products.

A 100% tariff would effectively double the price of French wine on American shelves. That $30 bottle of Bordeaux becomes $60. That $200 bottle of Dom Pérignon becomes $400.

The broader European picture

France may have been the first to act, but multiple European nations have either enacted or proposed their own versions of digital services taxes, including Italy, Spain, and the UK. The OECD has been trying to broker a global deal on digital taxation for years, with mixed results.

Trump’s warning wasn’t limited to France. He explicitly referenced European countries, plural, that implement digital services taxes. If the US follows through with retaliatory tariffs on every European nation with a DST, the trade disruption could extend well beyond wine into a much wider set of goods and services.

Macron affirmed his position on the same day Trump issued the threat, just hours before the G7 summit was set to begin.

What this means for investors

For traditional markets, agricultural and luxury goods stocks connected to transatlantic trade could see volatility. Companies in the French wine and spirits sector are obvious candidates for price pressure. On the flip side, US tech firms that have been paying DSTs might benefit if European countries eventually cave.

Traders should also keep an eye on whether Trump’s threat expands to include specific actions against the tech regulatory framework more broadly. His February 2025 memorandum covered not just DSTs but related EU regulations, which could encompass everything from data privacy rules to AI governance.