Digital taxes put US-EU commerce talks beneath strain – DW – 09/01/2025 | EUROtoday

The summer time commerce deal between the European Union and the Trump administration was alleged to mark a turning level in transatlantic relations after months of uncertainty. A 15% tariff cap wasn’t perfect, however EU leaders accepted it as the price of protecting commerce tensions with the United States at bay. That is, till US President Donald Trump reignited the dispute.

He is now threatening contemporary tariffs in retaliation for the EU’s digital providers taxes and expertise rules, accusing the bloc of unfairly focusing on US tech giants similar to Google and Amazon.

With the specter of recent duties looming, the commerce truce is once more on shaky floor.

In a put up Monday on the social media platform Truth Social, Trump warned that international locations imposing levies and guidelines would face “substantial additional tariffs” and export restrictions on essential US superior applied sciences, similar to chips. He demanded they be scrapped instantly, labeling the measures “discriminatory” and accusing the EU of giving a “complete pass to China’s largest tech companies.”

Trump decries EU taxes on Big Tech

While the EU’s tech and antitrust rules have been the bane of successive US administrations for greater than a decade, the bloc’s Digital Services Act (DSA) and Digital Markets Act(DMA) at the moment are squarely in Trump’s crosshairs.

These directives impose strict guidelines on on-line content material moderation and intention to curb more and more dominant tech companies similar to Meta, Apple, and Google. EU states can even levy their very own digital providers taxes on revenues generated by tech companies inside their borders, notably from internet advertising and the monetization of consumer information.

While there isn’t any EU-wide tax on digital providers, seven EU states have thus far launched nationwide levies, together with France, Italy, and Spain.

The United Kingdom, although not within the EU, has imposed an analogous 2% tax on revenues from massive on-line platforms. The annual £800 million ($1.08 billion, €900 million) that the tax generates had been a sore level in current US-UK commerce talks.

“There’s a perception [from the European side] that mostly US big tech companies are making large profits in the EU, which are not fairly taxed here and that we should do more to tax them where their profits are generated,” Roel Dom, an economist and analysis fellow on the European assume tank Bruegel, advised DW.

EU thrown off stability

Trump’s tech tariff menace actually caught EU policymakers off guard, coming simply weeks after they sealed a stabilizing commerce deal. While defending the bloc’s sovereign proper to regulate tech and digital markets, the European Commission’s chief spokesperson admitted the US president’s warning was “extraordinary and unexpected.”

“The US, in effect, wants an exemption for US companies, particularly around due diligence regulations and food safety,” Rem Korteweg, a senior fellow on the Netherlands-based Clingendael Institute assume tank, advised DW. “They may be willing to negotiate over the [digital] taxes, but knowing Trump, he will initially adopt a hardline position.”

No formal exemption from these legal guidelines has but been demanded. But the Trump administration’s push for larger EU market entry for US farmers and resistance to a different EU legislation — one which goals to spice up moral requirements in world commerce — indicate a transparent want for carve-outs to assist US firms keep away from the total weight of EU requirements.

The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) directs companies to repair human rights or environmental harms inside their world provide chains and has been broadly criticized in the US and Europe as overly burdensome.

EU not afraid to high quality Meta, Apple

With Trump now threatening new tariffs, Judith Arnal, a senior fellow at Spain’s Elcano Royal Institute, believes the “risk of confrontation” between Washington and Brussels “remains very real.” She noted how two US tech giants had already obtained “significant fines” from the EU because the bloc stands able to uphold its ideas in a number of methods.

Just days after Trump’s so-called “Liberation Day” tariff bombshell in April, Apple was fined €500 million ($583 million) for stopping app builders from directing customers to cheaper gives outdoors the Apple App Store, whereas Meta obtained a €200 million high quality after forcing customers to both pay for an ad-free expertise or consent to personalised advertisements.

This is along with the billions extra in EU fines and back-dated taxes handed down to US Big Tech lately.

“The purpose of these rules is not to punish US firms, but to ensure fair competition and digital markets that respect European values,” Arnal advised DW, backing the EU’s place that its digital rules must be “completely outside the scope of any trade negotiation.”

Does Brussels have a lot leverage?

Against Trump’s earlier tariff menace, the EU readied retaliatory tariffs of 25% on €93 billion value of US exports. However, Brussels did not implement the countermeasures, opting to first see how negotiations performed out. That method later drew widespread criticism for its perceived weak point, prompting calls from throughout the bloc for a firmer stance towards Trump’s newest aggression.

“[A wait-and-see approach] is acceptable in a context where there is trust, predictability and stability in the transatlantic relationship. But that’s gone,” Korteweg stated. “Is Europe now willing to stand up and meet power with power?”

Even if it had been, the EU lacks a trump card like that of China’s uncommon earths, the important minerals that the US is determined by and which Beijing is utilizing as strategic leverage in negotiations with the Trump administration.

While the EU remains to be one of many world’s largest financial blocs, it stays deeply depending on US tech giants for all the pieces from cloud providers to social media platforms and AI growth. The Ukraine conflict is a continuing reminder of the bloc’s reliance on the US for safety.

Could EU use anti-coercion measure for first time?

Brussels might, nevertheless, deploy its Anti-Coercion Instrument (ACI) — a newly developed instrument aimed toward tackling financial intimidation from third international locations. Conceived after China’s commerce dispute with Lithuania, the ACI empowers the European Commission to reply with a spread of countermeasures.

These embody tariffs, export controls, curbs on mental property and funding flows, in addition to blocking entry to the EU’s single market. But requires the instrument to be used towards the US on this case have been met with some skepticism, particularly given the bloc’s wait-and-see negotiating place final time.

“To move suddenly from no response at all to activating an untried and highly political tool would lack consistency,” Elcano’s Arnal advised DW. “It would also undermine the Union’s credibility as a defender of free trade.”

Bruegel’s Dom was extra optimistic, saying the anti-coercion measure would give the EU a number of choices to “fine-tune its response” to Trump’s newest targets.

He famous how the specter of a 3% EU digital service tax, which might harm US tech giants the toughest, was used as leverage in commerce talks earlier this 12 months, however was later shelved. Dom stated getting 27 member states to go the plan would additionally “be politically very difficult.”

While Brussels has restricted choices in responding to Trump’s newest calls for, analysts say it can also’t again down, like Canada, which not too long ago scrapped its digital providers tax hours earlier than it was on account of take impact, to restart US commerce talks.

“It is important that the EU doesn’t yield on tech regulation because this [issue] is so fundamentally close to all aspects related to sovereignty and would create a dangerous precedent,” Dom advised DW.

Edited by: Uwe Hessler