Report from Politico
In Brief – President Donald Trump used a social media post to threaten to impose a 100% tariff on any country that adopts a digital services tax (DST) targeting U.S. technology companies, warning in a social media post that the new tariff would immediately override any existing or future trade agreements. He said several European countries are considering or are close to introducing such taxes. The tariff threat came just one day after the EU member states approved a framework trade deal with the US that reduced tariffs on US industrial goods and some agricultural products to 15% in exchange for a US tariff cap of 15% on most EU products. In response, the European Commission defended its sovereign right to regulate and tax its economy, and called for a multilateral solution on global corporate taxes through the G7.
Context – Back in 2020 Europe became a hotbed of efforts to increase corporate taxes paid by the largest digital companies. France led the campaign, enacting a 3% DST. President Trump, in his first term, aggressively opposed DSTs and used tariff threats to keep them at bay. The US-France tax standoff provided a model to other governments, with DST taxes enacted, tariff threats pushing off collection, and talks at the OECD pressing for a global tax deal. In time, over a dozen countries, many in Europe, moved ahead with DSTs. The Biden Administration did reach a global tax deal that paired dropping DSTs with a global corporate minimum tax but it was never fully implemented. Trump objected to the OECD tax agreement and quickly exited it when he returned to office. He also revived tariff threats against countries with DSTs. However, his wave of tariffs in 2025 were applied to countries without regard to DST policies and none of the bilateral trade deals ended a national DST. In mid-2025, Congressional Republicans included a so-called “Revenge Tax” in their initial budget reconciliation bill to impose a big new tax penalty on foreign investors from countries with DSTs, but the Administration eventually called for it to be dropped because it would harm foreign investment in US. European DSTs are not going anywhere.