US threatens to retaliate against European companies in response to digital tax

“If the EU and its member states insist on continuing to restrict, limit, and discourage the competitiveness of U.S. service providers through discriminatory means, the United States will have no choice but to begin using every tool at its disposal to combat these unjustifiable measures,” the Office of the U.S. Trade Representative (USTR) said in a social media post on Tuesday.

“If response measures are necessary, U.S. law authorizes, among other actions, the imposition of fees or restrictions on foreign services,” the publication said.

The USTR cited several other European companies, including DHL Group, SAP, Amadeus IT Group, Capgemini, Publicis Groupe and Mistral AI, which it said have enjoyed unfettered access to the U.S. market for years.

At issue is the regulation of digital commerce, as the EU moves to regulate and tax US tech giants including Alphabet’s Google, Meta and Amazon.com. Critics of EU digital tax plans say they slow technological innovation, with global implications, and unfairly seek to increase revenues.

The threat could increase tensions between the US and EU amid weakening peace talks aimed at resolving the war in Ukraine. It also follows harsh criticism from US President Donald Trump, who last week in an interview with Politico called the bloc a “declining” group of nations, with “weak” leaders.

Trump has imposed drastic tariffs on imports – including 15% on many EU products – to combat tariffs and other barriers that he says unfairly limit the sale of American products.

Trump administration officials have accused the EU of flouting the terms of its trade deal with the United States, particularly the bloc’s commitment to “address unjustified barriers to digital trade.” A new US national security strategy released this month also risks stoking transatlantic tensions.

This strategy criticizes Europe for its immigration and cultural issues and questions whether European countries will continue to be desirable allies within NATO in the future.

Trump has also repeatedly criticized digital taxes, calling them non-tariff trade barriers that hurt U.S. businesses — and threatened to impose “substantial” tariffs on countries that adopt them. The US president has already suffered some setbacks, including Canada’s decision in June to cancel a digital tax just hours before it took effect.

However, the EU has made progress in enforcing its digital regulations, recently imposing hundreds of millions of dollars in fines on Apple Inc., Meta and Elon Musk’s social network X.

The European Union has defended its approach, with Trade Commissioner Maros Sefcovic telling Bloomberg TV on Monday that the bloc “will protect its technological sovereignty.”

Sefcovic also said he was in constant contact with U.S. Trade Representative Jamieson Greer and U.S. Commerce Secretary Howard Lutnick.

The USTR nevertheless said on Tuesday that the EU ignored US objections.

According to the body, the bloc has persisted “in a continuing series of discriminatory and harassing lawsuits, taxes, fines and directives against U.S. service providers” that “provide substantial free services to EU citizens and reliable commercial services to European businesses” while supporting millions of jobs and more than $100 billion in direct investment in Europe. “The US has raised concerns with the EU on these issues for years, without meaningful engagement or even fundamental acknowledgment of US concerns. »

Digital services taxes imposed by European countries on American companies have long angered American policymakers. Congress even considered countering these measures with a provision in Trump’s main tax cut legislation that would have imposed a “revenge tax” on countries deemed “discriminatory” by the United States.

US Treasury Secretary Scott Bessent led an effort to remove this provision from the bill after securing an agreement among G7 countries to exempt US companies from the global minimum tax. The agreement would include a “constructive dialogue on the taxation of the digital economy and on the preservation of the fiscal sovereignty of all countries,” according to a G7 press release at the time.

The dispute over digital services taxes looms over ongoing EU-US trade talks, as the Europeans seek new tariff exemptions, building on the bloc’s pledge to eliminate all tariffs on US industrial goods in exchange for a 15% tax rate on almost all its exports.

The USTR said Tuesday the risk extends to “other countries adopting a European-style strategy in this area” – a possible warning for Australia, the United Kingdom and other countries considering similar policies.