On Monday, the United States government said it may impose punitive duties of up to 100 per cent on US$2.4 billion (S$3.28 billion) of imports from France, including champagne, handbags, cheese and other products, after concluding that France's new digital services tax would harm USA tech companies.
On Monday, US trade officials said that they had investigated the measure and found it was "unusually burdensome for affected US companies", according to a statement.
French wine and cheese are on the list of goods that could be targeted as soon as mid-January, as well as handbags, porcelain, yoghurt and other French products.
French Finance Minister Bruno Le Maire already said on French radio that such tariffs could lead to a "strong European riposte".
But prior to the release of the USTR's report, a French official said that France would dispute the trade agency's findings, repeating Paris' contention that the digital tax is not aimed specifically at US technology companies. In a separate press release, it also recommends new tariffs and says that there could be more investigations into the digital taxes of Austria, Italy and Turkey.
"The USTR is focused on countering the growing protectionism of European Union member states, which unfairly targets USA companies", Lighthizer said.
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.
Monday's report concludes more than four-month-long probe, known as a Section 301 investigation, into France's tax regime, which Lighthizer in July said "unfairly targets American companies".
The tax affects companies with at least 750 million euros ($830 million) in annual global revenue on their digital activities.
French cheese producers expressed concern that the threatened new tariffs would hit small businesses hardest. "It's not the behavior we expect from the United States toward one of its main allies".
He also noted that France will reimburse the tax if the USA agrees to the global tax plan.
French junior economy minister Agnes Pannier-Runacher told Sud Radio that France would be "pugnacious" in its dealings with the U.S. on the matter, and that France would not back down on its digital tax plans.
"What we want is a plan for worldwide tax that is on the table" at the Organization for Economic Cooperation and Development, Le Maire said.
The French tax, enacted earlier this year, imposes a three percent levy on the revenues earned by technology firms in France, which often come from online advertising and other digital services.
Trump in August suggested tariffs of up to 100% on French wine and told aides that while he's not generally empathetic with USA tech companies, he believes it should be the US - not any other country - that taxes them, people familiar with internal deliberations said.