Trump orders trade chief to revive tariff retaliation against digital taxes

WASHINGTON: US President Donald Trump on Friday (Feb 21) ordered his trade chief to revive investigations aimed at imposing tariffs on imports from countries that levy digital service taxes on US technology companies.

A White House official, providing details of the order, said Trump was directing his administration to consider responsive actions like tariffs "to combat the digital service taxes, fines, practices, and policies that foreign governments levy on American companies".

"President Trump will not allow foreign governments to appropriate America's tax base for their own benefit," the official said.

The memo directs the US Trade Representative's (USTR) office to renew digital service tax investigations that were initiated during Trump's first term, and investigate any additional countries that use a digital tax "to discriminate against US companies", according to a White House fact sheet.

The digital service taxes aimed at dominant US tech giants including Alphabet's Google, Meta's Facebook, Apple and Amazon have been a longstanding trade irritant for multiple US administrations.

Britain, France, Italy, Spain, Turkey, India, Austria and Canada have levied the taxes on sales revenue by these and other digital service providers within their borders.

During Trump's first term, USTR launched Section 301 unfair trade practices against several of these countries, finding they discriminated against US companies, paving the way for retaliatory tariffs on certain imports.

"What they're doing to us in other countries is terrible with digital," Trump told reporters ahead of his memo signing.

He previewed the action last week, saying that he would impose tariffs on goods from Canada and France over their digital service taxes. A White House fact sheet released at the time said each had collected over US$500 million annually in digital service tax revenues, with global levies at over US$2 billion.

Trump's memo also directs his administration to review whether any policy in the European Union or Britain "incentivises US companies to develop or use products and technology in ways that undermine free speech or foster censorship".

The White House fact sheet said that it will especially scrutinise how US firms are treated under the EU's Digital Markets Act and Digital Services Act.

Sources told Reuters earlier on Friday that Google is set to be charged with breaching the Digital Markets Act after proposed changes to its search results failed to address the EU antitrust regulator's concerns and those of its rivals.

BATON PASS

After Trump's first administration launched the digital tax probes, former president Joe Biden's trade chief, Katherine Tai, in 2021 followed up by announcing 25 per cent tariffs on over US$2 billion worth of imports from six countries, but immediately suspended them to allow negotiations on a global tax deal to continue.

Those negotiations led to a 15 per cent global corporate minimum tax that the US Congress never ratified. Talks on a second component, meant to create an alternative to the digital taxes, have largely ground to a halt with no agreement.

Trump on his first day in office effectively pulled the US out of the global tax arrangement with nearly 140 countries, declaring that the 15 per cent global minimum tax has "no force or effect in the United States" and ordering the US Treasury to prepare options for "protective measures".

Trump did not disclose how high a tariff rate he would charge on the retaliatory duties, nor the value of goods targeted.

In 2021, Tai announced that USTR would impose 25 per cent tariffs on about US$887 million worth of goods from Britain, including clothing, footwear and cosmetics, and on about US$386 million worth of goods from Italy, including clothing, handbags and optical lenses.

USTR said at the time it would impose tariffs on goods worth US$323 million from Spain, US$310 million from Turkey, US$118 million from India and US$65 million from Austria. USTR separately suspended tariffs on US$1.3 billion worth of French cosmetics, handbags and other goods.