Report from DW
In Brief – Facing an increasingly aggressive and sizeable collection of tariff increases being imposed by the Trump Administration and searching for the right mix of retaliatory responses, the European Commission is considering trade penalties against US services companies, including so-called Big Tech. The Trump Administration has imposed significant new tariffs on steel and aluminum, as well as autos and auto parts, which are major EU exports. And Trump is promising a further large round of country-by-country increases described as “reciprocal tariffs” linked to the barriers imposed by trading partners on US exports. In developing their retaliatory response to the US tariffs, the Commission and EU member states are reportedly considering extending retaliation to services industries because US services exports to Europe are so sizeable, outstripping US goods exports and therefore providing more options to choose targets that make the most sense for Europe. In developing their trade retaliation, the EU may use new trade retaliation authority enacted in 2023 with Chinese threats in mind. Referred to as their “trade bazooka”, the EU can impose a range of penalties on digital and services companies, including tariff-like levies but also restrictions on government contracting and even limits on company IP rights.
Context – Whether Willie Sutton really said, “I robbed banks because that’s where the money is,” that’s what’s going on here. The EU runs a big trade surplus with the US on goods. But services are the opposite story, including digital services. If the EU wants to match US trade barriers dollar for dollar, adding penalties on services drastically increases the EU’s ability to pick ways to impose more political pain on the US and reduce economic self-harm in Europe. President Trump’s willingness to threaten trade retaliation for all kinds of foreign taxes and regulatory penalties might be appealing to some US tech companies who thought the prior administration did not stand up for them, but a full-scale trade war that pulls them directly in is likely to be a different matter. EU tech sovereignty backers may smartly tie trade retaliation with domestic tech development initiatives.