Trump says he will impose retaliatory tariffs for digital taxes, may come Friday

Washington: President Donald Trump said on Friday that he would sign a memorandum to impose tariffs on countries that levy digital service taxes on US technology companies.

A White House official, providing details of the order, said Trump was directing his administration to consider responsive actions like tariffs "to combat the digital service taxes (DSTs), fines, practices, and policies that foreign governments levy on American companies."

"President Trump will not allow foreign governments to appropriate America's tax base for their own benefit," the official said.

The memo directs the US Trade Representative's office to renew digital service taxes investigations that were initiated during Trump's first term, and investigate any additional countries that use a digital tax "to discriminate against US companies," the official said.

Trump, asked at the White House if he would sign a tariff order on digital taxes, told reporters: "We are going to be doing that, digital. What they're doing to us in other countries is terrible with digital, so we're going to be announcing that, maybe today."

Trump said last week that he would impose tariffs on Canada and France over their digital services taxes, and a White House fact sheet released at the time said that "only America should be allowed to tax American firms."

It complained that Canada and France used the taxes to each collect over $500 million per year from US companies.

"Overall, these non-reciprocal taxes cost America's firms over $2 billion per year. Reciprocal tariffs will bring back fairness and prosperity to the distorted international trade system and stop Americans from being taken advantage of," said the fact sheet. It gave no further details.

Longstanding Irritant

The digital service taxes aimed at US tech giants including Alphabet's Google, Meta's Facebook, Apple and Amazon have been a source of trade disputes for years.

Britain, France, Italy, Spain, Turkey, India, Austria and Canada have imposed the taxes, levied on revenues earned from digital services sold within their borders.

The US Trade Representative's office during Trump's first term found them to discriminate against US companies in its investigations and readied retaliatory tariffs.

President Joe Biden's trade chief, Katherine Tai, in 2021 followed up on these probes and announced 25 per cent tariffs on over $2 billion worth of imports from six countries, but immediately suspended them to allow negotiations on a global tax deal to continue.

Those negotiations led to a 15 per cent global corporate minimum tax that the US Congress never ratified. Talks on a second component, meant to create an alternative to the digital taxes, have largely ground to a halt with no agreement.

Trump on his first day in office effectively pulled the US out of the global tax arrangement with nearly 140 countries, declaring that the 15 per cent global minimum tax has "no force or effect in the United States" and ordering the US Treasury to prepare options for "protective measures."

A new Trump order could allow USTR'S retaliatory duties to be reactivated. They were designed to offset the amount of digital service taxes collected.

In 2021 USTR said it would impose 25 per cent tariffs on about $887 million worth of goods from Britain, including clothing, footwear and cosmetics, and on about $386 million worth of goods from Italy, including clothing, handbags and optical lenses.

USTR said at the time it would impose tariffs on goods worth $323 million from Spain, $310 million from Turkey, $118 million from India and $65 million from Austria. USTR separately suspended tariffs on $1.3 billion worth of French cosmetics, handbags and other goods.