Trump's tariff threat: EU considers targeting tech giants
President Donald Trump has threatened to impose a 50% tariff on imports from the European Union starting 1 June. This is more than double the earlier threat. The EU is preparing a response that may include traditional tariffs on American products but is also considering actions targeting US tech giants.
President Trump announced his intentions on 23 May, stating that EU "has been very difficult to deal with," and that "our discussions with them are going nowhere." This announcement was a significant blow to European officials, who, according to an internal memorandum from 14 May (obtained by The Economist), believed in the potential to de-escalate trade tensions as the United States began to feel the consequences of earlier tariffs imposed by Trump.
The European Union has already prepared preliminary retaliatory measures that could affect US imports and exports valued at $100 (€88) billion annually. Planned are traditional tariffs on American transportation equipment, agricultural products, and even roller coasters. The EU also intends to limit sales of chemicals and metals, which American mills rely on. Considering the scale of Trump's proposed tariffs, especially the latest ones, these measures would only constitute a moderate counter.
Digital services as the Achilles' heel of the US
Although the European Union has a surplus in trade of goods with America, it buys more services than it sells. Therefore, the EU is considering more modern forms of retaliation. Trump complains about penalties imposed by the EU on American tech giants, but the bloc could go much further. American digital services constitute a vulnerable point that Europe could exploit.
According to the World Trade Organization moratorium, "electronic transmissions" are exempt from tariffs, and attempting to impose charges on them directly would be a bureaucratic and legal nightmare. Thus, three options remain: technical restrictions, new taxes, and intensified legal proceedings.
Regarding restrictions, Stéphane Séjourné, Vice President of the European Commission for the Internal Market, wants to introduce "Buy European" clauses for sensitive sectors. Some countries are already analysing their dependence on American digital service providers. The European Union could tighten regulations, especially as it is soon to publish a set of cloud rules. Microsoft has already tried to ease European concerns, announcing "five digital commitments," which include helping to build infrastructure and protecting privacy.
Taxes and legal actions as alternative means of pressure
Data storage is another issue the EU can leverage. Another option would be to tax digital services. Such taxes typically target advertising revenues once they exceed a certain threshold. They attempt to circumvent the fact that tech companies record profits in low-tax jurisdictions rather than where value is created or sales are made. The problem is that, like tariffs, such taxes hit consumers.
There is also another possibility—legal actions. On 23 April, the Commission fined Meta and Apple €200 million and €500 million, respectively, for violating the EU's Digital Markets Act (DMA). A decision regarding Alphabet is expected soon. The EU could increase fines in the future as the DMA becomes more established. The DMA's sister law, the Digital Services Act, aimed at preventing harmful content and misinformation, is another possible weapon. It has already been used against Elon Musk's platform X.
