U.S. President Donald Trump’s escalation of his war against European tech regulation and taxation has prompted alarm and defiance on the other side of the Atlantic.
Trump issued a memorandum on Friday that threatened tariffs against any country that dares to tax or fine or enforce tech rules against a U.S. company in a way the Trump administration deems discriminatory or disproportionate.
The threat seemingly targeted a swath of laws and systems, in Europe and the U.K. in particular, that cover everything from privacy and content-moderation rules to tax and telecommunications network fees.
“We are concerned about the broad interpretations reflected in the memorandum and the unilateral actions they may trigger, as well as their potential impact on EU-U.S. trade and investment,” said European Commission spokesman Thomas Regnier.
“If needed, the EU will respond swiftly and decisively to defend its rights and regulatory autonomy against unjustified measures.”
Taxing times
Trump was particularly outraged by the concept of digital services taxes, under which countries like the U.K. and Italy levy a small tax—in those cases 2% and 3%, respectively—on the local revenues of online platforms like search engines and social media services. He alleged that these laws are designed to “plunder American companies.”
This is a continuation of an effort Trump started in his first term, though former President Joe Biden was also no fan of these taxes, which disproportionately affect U.S. multinationals given their disproportionate presence in markets around the world.
In mid-2021, Biden went so far as to announce and then immediately suspend tariffs against countries that had introduced digital services taxes (DSTs). Later that year, he struck a deal whereby the countries agreed to drop their national taxes once a global deal fully came into force, allowing countries to get more money out of multinationals (not just tech firms) for their local activity. That still hasn’t happened.
It is not yet clear if Trump’s new threats will lead to “concrete U.S. actions against foreign countries,” said Juan Manuel Vazquez, an Amsterdam-based tax lawyer at Loyens & Loeff. “As experience tells, the existing threats may ... be used as leverage to negotiate and impose conditions in other global negotiations,” he added.
“DSTs should be understood as taxes on the extraction of users’ data, which represents to large digital companies what oil was for the big oil companies of the past,” Vazquez said in emailed comments. “The circumstance that most digital companies covered by DSTs are U.S.-based is a mere reflection and/or consequence of the fact that most companies that monetize user data are based [there].”
The U.K. Treasury, which will conduct a long-scheduled review of its digital services tax this year, said it raises up to £1 billion [$1.27 billion] a year and does not take into account where a multinational is based.
Similarly, Regnier said the digital services taxes of EU member states were “nondiscriminatory and apply to all large digital services companies, including those from the EU, China, U.K. and the U.S.” The Italian government declined to comment on Trump’s tariff threat.
‘Other cultures’
Trump’s tax offensive may be part of a long-standing U.S. effort to minimize countries’ taxes on its tech giants, but other elements of his Friday broadside go far beyond what previous U.S. administrations have tried to achieve. Indeed, some appear to be an assault on Europe’s right to live under its own values and norms.
The president’s memorandum railed against “foreign legal regimes” that “limit cross-border data flows.” This was likely an attack on Europe’s privacy laws, which may soon make it impossible for Big Tech to transfer Europeans’ personal data to the U.S.—Trump’s recent gutting of his government’s Privacy and Civil Liberties Oversight Board has drastically increased the likelihood of this outcome.
Trump also promised a review of EU and U.K. laws that force U.S. tech firms to “develop or use products and technology in ways that undermine free speech or foster censorship.” The targets here are clearly the EU’s Digital Services Act and the U.K.’s Online Safety Act, both of which force online platforms to tackle illegal and harmful content.
Vice President JD Vance already denounced the EU’s content and tech antitrust laws earlier this month, while Meta made it clear that it would run to the Trump administration if the EU hit it with an antitrust fine, as may happen next month. Following those developments, the EU’s tech and competition commissioners both insisted that Europe would not be dissuaded from enforcing its laws.
“Making trade dependent on exempting U.S. companies from local taxes or protections that nation states make on behalf of their citizens, is an act of economic machismo,” the British lawmaker Beeban Kidron, who has recently been fighting to make sure AI companies respect British copyright law, told Fortune.
“If ‘America First’ means that there is no room for other cultures, other social or political priorities—including the protection of children—then I would expect the U.K. government, or indeed any government worthy of its name, to remember the first duty of the government is to protect its citizens,” added Baroness Kidron, best known as the director of hit films like Bridget Jones: The Edge of Reason and To Wong Foo, Thanks for Everything! Julie Newmar.
Trump’s memo also mentioned laws that “require American streaming services to fund local productions.” France’s implementation of such a scheme is probably the most famous, forcing global streamers to invest at least 20% of their French revenues in French productions. France said late last year that the requirement had pulled in over $1 billion in investment from 2021 through the end of 2023.
Net neutrality
One of the more curious aspects of the memo was its reference to “network usage and internet termination fees” being levied on American companies, unfairly increasing their costs.
Here, Trump was essentially advocating for so-called net neutrality—a principle that says telecoms network operators can’t charge content providers for carrying their traffic. South Korea and Germany have both violated this principle in their local laws and regulations, much to the annoyance of Big Tech.
But the first Trump administration killed off the U.S. implementation of net neutrality. Biden’s Federal Communications Commission then revived the rule, only to see it struck down by a federal appeals court at the start of this year.
Net neutrality is unlikely to return to America anytime soon, as Trump’s new FCC chair, Brendan Carr, is a fierce opponent.
