Trump Retaliates Against European Digital Taxes with New Tariffs and Chip Restrictions

TradingKey - On Monday, US President Donald Trump threatened to impose additional tariffs on all countries that do not revoke their digital taxes and to tighten US chip export restrictions.

The digital services tax is an emerging levy on revenues generated from digital services such as search engines and online advertising, implemented in many European countries. For instance, the UK currently imposes a 2% digital services tax on companies with global revenues exceeding £500 million and UK revenues surpassing £25 million. Other EU member states, including France, Italy, and Spain, have also implemented digital services taxes.

Advocates of the tax argue that tech giants, which earn billions in profits, pay little to no taxes locally. They believe the digital services tax ensures fairer taxation.

Trump, however, claims that digital taxes, digital services legislation, and digital market regulations are designed to harm or discriminate against US technology. This tax directly impacts American tech giants like Alphabet, Meta, and Amazon, while allegedly giving "a complete pass" to China's largest tech companies.

In fact, this is not Trump's first criticism of the digital tax. In June, following Canada’s introduction of its own digital tax, Trump announced a suspension of all trade talks with Canada. Eventually, Canada withdrew the measure before it took effect, seen as a concession to the US.

US officials have repeatedly criticized the UK’s digital services tax, but it remains in place following the US-UK trade agreement.

Beyond the digital tax, the EU has also introduced the Digital Services Act, requiring platforms with more than 45 million EU users, like Meta’s Facebook, Instagram, TikTok, and X, to adhere to strict rules. These include assessing and mitigating major risks, such as the spread of misinformation and harm to minors.

This has also faced American criticism. US Republicans, including Vice President Vance, argue that the law institutionalizes censorship, stifling free speech. In response, the US State Department has launched a campaign against the regulation. In May, Secretary of State Marco Rubio introduced visa restrictions barring "foreigners who censor Americans" from entering the US.

According to recent media reports, the US has yet to finalize its response to the digital tax.

Last week, the US and the EU issued a joint statement announcing agreement on the framework of a trade deal, pledging to address unreasonable trade barriers together and not to impose tariffs on electronic transmissions. The EU confirmed it would not levy network usage fees.

Analysts suggest Trump’s threats could further strain US-EU trade relations. Following Trump’s public threats, the euro briefly fell nearly 1% against the dollar, trading at 1.1602.