USTR SET TO HIT FRANCE WITH NEW TARIFFS IN TAX DISPUTE: New 25 percent U.S. tariffs on $1.3 billion worth of French handbags, cosmetics and soaps will take effect Wednesday, barring a last-minute change of plans by the Trump administration. That could prompt the EU to strike back on an equivalent amount of U.S. goods. Lighthizer announced the tariffs in July in retaliation for France's digital services tax, which the Trump administration believes is unfairly aimed at U.S. internet giants like Google, Amazon, Facebook and Apple. But he suspended the tariffs for 180 days to allow time for a negotiated settlement in talks among 137 nations that are being facilitated by the Organization for Economic Cooperation and Development. Big money: Since then, the OECD talks have failed to reach an agreement and France has begun collecting its digital services tax, which USTR estimates will cost U.S. internet companies at least $450 million for their 2020 activities and $500 million for 2021. The United States believes France struck the first blow in the dispute by imposing the tax. Still, the EU has vowed to strike back if USTR imposes its retaliation this week. That raises the possibility the U.S. could retaliate against any EU retaliation. It will be the job of President-elect Joe Biden's administration to resolve the issue, whatever happens in the final 16 days of President Donald Trump's administration. More to come?: In June, Lighthizer opened 10 new investigations targeting digital services taxes that had been adopted or were under consideration by Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. USTR still has not released the results of those investigations but could at any time, and potentially target billions of dollars' worth of imports from those countries. USTR IMPOSES TARIFFS ON MORE EU GOODS IN AIRCRAFT DISPUTE: USTR plans to impose tariffs on additional European Union goods — specifically more aircraft parts, wines containing more than 14 percent alcohol and other alcoholic beverages from France and Germany — in a long-running dispute over competing government subsidy programs for Airbus and Boeing. The United States has had WTO-approved retaliatory tariffs on an estimated $7.5 billion worth of goods for over a year. However, the European Union only recently won WTO approval to impose retaliatory tariffs on an estimated $4 billion worth of U.S. goods. USTR accused the EU last week of using "drastically reduced" trade volumes because of the coronavirus pandemics to justify imposing duties on more U.S. products than would normally be the case. "As a result, to keep the two actions proportionate to each other, the U.S. is forced to change its reference period to the same period used by the European Union," USTR said. Not pain free: The move increases U.S. leverage in the difficult negotiations aimed at resolving the dispute. But it elicited new howls of protests from alcoholic beverage companies that already have been hard hit by U.S. and EU tariff actions. "These tariffs are continuing to have a devastating impact on our businesses, which are also suffering due to the closings of restaurants, bars and distillery tasting rooms because of the Covid-19 pandemic," the Distilled Spirits Council of the United States said in a statement. VIETNAM TARIFF DECISIONS LOOM: USTR could announce what, if any, tariffs it plans to impose on Vietnam this week after receiving final comments on Wednesday and Thursday in a pair of investigations. One probe looks at the country's alleged use of illegally harvested lumber in wood products exported to the U.S., and the other examines whether Vietnam undervalues its currency for an unfair trade advantage. Companies are bracing for the Trump administration to impose duties in both investigations before leaving office on Jan. 20. But USTR still needs to complete several procedural steps. Those include formally completing the investigations, outlining its proposed actions and allowing for public comment before any action takes effect. To do that within less than two weeks would require an extraordinarily short public comment and almost certainly no public hearing. In contrast, USTR provided much longer notice and held days of public hearings each time Trump proposed increasing tariffs on China in 2018 and 2019. USTR's press office has not responded to requests from Morning Trade to clarify its plans. Vietnam makes its case for no tariffs: In a background paper distributed to reporters on Sunday, the Vietnamese government made its case for why it thinks any tariffs would be unjustified. It also said plans were underway for a call between Vietnam's Minister of Trade and Industry Tran Tuan Anh and Lighthizer, as well as a separate call between Deputy Prime Minister Pham Binh Minh and Pompeo. Since USTR announced the two investigations on Oct. 2, Vietnam's Prime Minister Nguyen Xuan Phuc has sent two letters to Trump and had "a very positive and fruitful call" with him two weeks ago, the background paper said. No explicit retaliation threat: The paper said Vietnam hopes USTR's concerns can be resolved through consultations, rather than tariffs. "Vietnam is willing to negotiate with the USTR to upgrade the current bilateral trade action plan towards a more balanced, sustainable and mutually beneficial trade relations," the paper said. It stopped short of threatening retaliation, but noted that Vietnam is an important market for many U.S. exports. Currently, "the government and relevant agencies of Vietnam are taking very strong and decisive measures to purchase more U.S. products and services, including airplanes, LNG [and] agricultural products," the paper said. USTR EXTENDS COVID-19 TARIFF EXCLUSIONS: U.S. medical supply distributors will be able to import a long list of pandemic-related items from China for another three months without paying duties ordered by Trump. USTR announced several rounds of exclusions for Covid-19 products in the first half of 2020. But those would have expired on Dec 31. without the extension announced by USTR early last week in the Federal Register. Others not so lucky: However, USTR did not extend a long list of other China tariffs exclusions that expired on Dec. 31, despite a plea from more than 160 business organizations. 'De minimis' relief also targeted: In addition, the Treasury Department has proposed eliminating the "de minimis" provision that waives the tariffs on shipments from China worth less than $800. That prompted Senate Finance Chair Chuck Grassley (R-Iowa) and several other senators to write in protest to White House budget director Russell Vought. "If this proposed rule went forward, it would require the submission of customs entries for millions of additional shipments and increase taxes on numerous small businesses," the senators wrote. They urged Vought to designate the proposal as an "significant regulatory action" so it is subject to more scrutiny before becoming final. FINAL TWO MEMBERS ADDED TO USMCA LABOR BOARD: The "Independent Mexico Labor Expert Board" created by the USMCA now has a full slate of 12 members. Its job is to monitor and evaluate how well Mexico is implementing its labor reform and complying with its labor obligations under the USMCA. The board also can recommend capacity-building activities needed to support Mexico's implementation and compliance. The USMCA allows USTR's Labor Advisory Committee to appoint four members and the Senate and the House to each appoint four members, equally divided between Republicans and Democrats. Senate Majority Leader Mitch McConnell appointed Kyle Fortson, a labor lawyer, and Charlotte Ponticelli, a former senior Labor Department official, over the holidays. Seven board members come from union groups: Benjamin Davis at the United Steelworkers, Owen Herrnstadt at the International Association of Machinists and Aerospace Workers, Daniel Mauer at the Communications Workers of America, Jason Wade at the United Auto Workers, Catherine Feingold at the AFL-CIO, Fred Ross at the International Brotherhood of Electrical Workers and Timothy Beaty at the International Brotherhood of Teamsters. House Minority Leader Kevin McCarthy appointed labor lawyers Stefan Marculewicz and Philip Miscimarra. Senate Minority Leader Chuck Schumer appointed former International Labor Organization Deputy Director General Sandra Polaski and Beaty. House Speaker Nancy Pelosi chose Feingold and Ross. TRUMP RENOMINATES BARLOON TO TRADE COURT: Trump has renominated USTR General Counsel Joseph Barloon to a vacancy on the U.S. Court of International Trade, which is based in New York. Barloon has been USTR general counsel since 2019. He previously was a partner at Skadden Arps, where Lighthizer worked for years before becoming USTR. Trump originally nominated Barloon in November. That expired when the 116th Congress ended Sunday. Finance departure: Michael Zona, who fielded countless Morning Trade questions as Senate Finance communications director over the past two years, is leaving Capitol Hill to join Bullpen Strategy Group in their communications and public advisory division. | 
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