Bonjour et Bienvenue to the Paris Edition. I’m Bloomberg Opinion columnist Lionel Laurent. If you haven’t yet, subscribe now to the Paris Edition newsletter.

Tariff Relief

French business executives are days away from facing up to the final number of what is politely known in the lexicon as an “asymmetric” trade agreement: The new tariff rate that will be imposed by the Trump administration on European goods, from plane engines to cars to wines, without a response in kind going the other way. Considering the US’s recent hardball threats of as much as 30%, the mood in Paris is curiously calm.

Part of that is to do with the fading probability of the actual number ending up that high. Expectations are now in the 15% range, which BNP Paribas’ Chief Financial Officer Lars Machenil would be “manageable” – a sentiment shared by investors, with France’s CAC 40 blue-chip stock index outperforming the region over the past month. Perhaps it also helps that BNP reported better-than-expected quarterly profits this week, a sign its traders have been able to ride out the volatility of trade-war worries this year.

It’s also to do with the geopolitical reality of negotiating with an America whose economic, defense and technology influence over Europe runs deep. LVMH boss Bernard Arnault, who has been exercising his own brand of shuttle diplomacy to try and defuse trade tensions, has given several interviews saying a breakdown in relations would be too costly. Saying he was “reasonably optimistic” that a deal would emerge, he cautioned European leaders against stepping up retaliatory threats.

But it’s also clear that French bosses know they have a lot to lose from a tit-for-tat trade war. They’ve made great gains from the free-wheeling globalization era and the CAC 40 generates about half its revenues outside Europe. Today, things are very different, with even Arnault’s LVMH in the eye of a luxury storm that saw the company’s second-quarter revenue drop more than expected. Arnault is clearly leaving nothing to chance, with plans to open a new factory in the US state of Texas by 2027; he opened a first one there 2019 in similar conditions as firms scrambled to dent the impact of tariff threats.

And as for the French economy, things still feel uncertain. Bloomberg Economics’ Jean Dalbard expects it to grow by 0.5%, dragged down by weak demand and political uncertainty. But the risks from trade vary widely depending on what gets decided over the next few days. A rate of 30%, which is the current hardball threat, would essentially wipe out the growth gains made this year.

Fifteen percent may be the new “manageable,” but “let them eat tariffs” doesn’t feel like a comforting place to be in.

LVMH sales fell as shoppers reined in purchases of costly Louis Vuitton bags and Dior jackets, a sign the luxury titan remains stuck in a post-pandemic slump.

French tax officials are questioning Wall Street banks with significant trading floors in Paris to learn more about transactions allegedly designed to escape dues on dividend payments, according to people familiar with the matter.

Germany and France sought to defuse tensions over a planned joint fighter jet program, asking their defense ministers to present a solution in August as one of the region’s most ambitious weapons systems remains mired in conflict.

An FCAS model aircraft. Photographer: Julien De Rosa/Getty Images

BNP Paribas’ chief financial officer said Europe’s economy should be able to deal with a 15% tariff rate as talks with the US are progressing.

Macron said France would recognize a Palestinian state in September, prompting a backlash from the US and Israel.

Bank of France boss Francois Villeroy de Galhau said the European Central Bank needed to stay flexible about where to take interest rates.

Monday: EssilorLuxottica results

Tuesday: Results from Kering, L'Oreal, Amundi, Air Liquide, Orange

Wednesday: Results from Airbus, Hermes, Capgemini, Danone, Vinci; French 2Q preliminary GDP; June consumer spending

Thursday: Results from SocGen, Credit Agricole, Remault, Sanofi, Air France-KLM, Safran, Schneider; French July preliminary CPI inflation; June PPI data

Friday: Axa, Engie results; PFA car registrations for July

Wine woes are spreading to the US: Why tariffs on your favorite French red are making American industry nervous.

Bottles of French wine.  Photographer: Benjamin Girette/Bloomberg

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