US Threatens Tariffs on Countries with Digital Services Taxes
US President Donald Trump has threatened to impose "substantial additional tariffs" and technology export restrictions on any country with digital services taxes. In a social media post, Trump argued that such taxes, prevalent in Europe, are discriminatory and designed to harm American technology companies like Google and Meta, while giving a pass to Chinese firms. This move signals a potential new front in global trade disputes, escalating tensions with key allies that have adopted or are considering such levies.
Unpacked:
Digital services taxes are levies imposed on revenues generated by large digital companies, often targeting online advertising, marketplaces, or user data. They have become contentious because many DSTs disproportionately impact major US tech firms, which dominate the global market, leading the US to view them as discriminatory trade barriers.
Countries with DSTs under scrutiny include France, Austria, Italy, Spain, Turkey, the United Kingdom, and Canada. Several other nations have proposed or implemented similar taxes, and the US administration has directed investigations into any new adopters of such measures.
The Trump administration previously investigated DSTs under Section 301 of the Trade Act, reached deals to avoid tariffs, and suspended retaliatory measures during global tax negotiations. The Biden administration maintained this approach until negotiations stalled, after which President Trump withdrew from the talks and threatened renewed tariffs in 2025.
The OECD led global talks aiming to reform how multinational tech giants are taxed and prevent unilateral DSTs, seeking a unified solution (Pillar 1 reform). The US withdrawal from these talks in 2025 threatens to escalate trade disputes and complicate efforts to reach international tax consensus.