Donald Trump has once again brought the digital tax issue to the forefront of the trade dispute between the United States and the EU. He has issued a direct threat to Ursula von der Leyen, stating that any country imposing a tax on the digital services of American companies will be met with 100% tariffs on all goods sold to the United States. This characteristic Trumpian threat emerges in a regulatory context where the Digital Euro has recently surfaced, creating tension. It appears that Visa and Mastercard are at the heart of the matter, with the focus on digital services possibly serving as a diversion.
The warning comes at a time when several European countries are still discussing taxing the digital revenues of giants like Google, Amazon, Meta, and Apple. These companies generate significant revenue in markets where they often lack a proportional physical presence to their earnings and typically avoid taxes through fiscal engineering.
Trump Warns the EU: Digital Tax on US Big Tech Means 100% Tariffs on EU Imports
Trump’s message was quite direct, not specifying a particular product or a limited reprisal, but rather a total commercial response against “each and every” good shipped to the United States from the country implementing such a tax.
He further added that this punishment would supersede any trade agreement, whether signed, applied, or pending. This directly pressures the agreement reached between the United States and the European Union. Recall that US tariffs on European products were capped at 15% in exchange for Europe reducing taxes on American industrial goods to zero.
The conflict has a long history, as Europe has argued for years that large digital platforms should be taxed where they generate revenue, even if their fiscal headquarters or international structure is organized differently. Naturally, the US is responding.
France and Spain Lead the Charge on This Issue
For several European governments, the issue lies in how the digital business model allows for the sale of advertising, management of marketplaces, collection of commissions, or exploitation of local user data without the same physical footprint as a traditional company. This creates a clear sense that classic tax rules have become outdated for these types of businesses.
France is the most prominent example, having implemented a 3% tax on certain digital revenues generated within the country by companies with over 25 million euros in local turnover and over 750 million euros globally since 2019. Furthermore, some French lawmakers have proposed doubling this tax to 6%. Washington views this as a direct attack on American tech companies, as they dominate a significant portion of the global market for online advertising, digital commerce, social media, and cloud services.
The US Trade Representative’s office has long targeted countries like France, the United Kingdom, Austria, and Spain for these digital taxes, arguing that they discriminate against American companies. Trump is now escalating this pressure with a much broader threat, no longer just affecting Big Tech but any European exporter reliant on the US market, from cars and machinery to wine, food, and industrial products.
