Tariffs Threatened in Response to Digital Taxes, Other Measures

In a Feb. 21 memorandum President Trump threatened to impose import tariffs in response to a wide range of burdens imposed by foreign governments on U.S. companies.

The memo states that the Trump administration’s policy will be to act via tariffs or other actions when a foreign government “imposes a fine, penalty, tax, or other burden that is discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities.” Specifically, the administration will consider (1) taxes imposed on U.S. companies by foreign governments, including those that may discriminate against U.S. companies, (2) regulations imposed on U.S. companies by foreign governments that could inhibit the growth or intended operation of U.S. companies, (3) any act, policy, or practice of a foreign government that could require a U.S. company to jeopardize its intellectual property, and (4) any other act, policy, or practice of a foreign government that serves to undermine the global competitiveness of U.S. companies.

The memo also directs federal agencies to take the following actions.

– The Office of the U.S. Trade Representative will determine whether to renew Section 301 investigations of the digital services taxes of France, Austria, Italy, Spain, Turkey, and the United Kingdom and, if a positive determination is made, will take “all appropriate and feasible action in response to those DSTs.” (Several years ago USTR proposed additional tariffs of up to 25 percent on $2.1 billion worth of imports from these countries after finding that their DSTs would discriminate against U.S. companies, but that proposal was suspended and ultimately terminated to facilitate the negotiation of a related agreement among members of the Organization for Economic Cooperation and Development.)

– USTR will also determine whether to (1) investigate the DST of any other country that may discriminate against U.S. companies or burden or restrict U.S. commerce, (2) pursue a panel under the U.S.-Mexico-Canada Agreement on the DST imposed by Canada, and (3) conduct a Section 301 investigation of Canada’s DST.

– USTR, together with the departments of Commerce and the Treasury, will (1) jointly identify trade and other regulatory practices by other countries (see numbered list above) that discriminate against, disproportionately affect, or otherwise undermine the global competitiveness or intended operation of U.S. companies in the digital economy and more generally, (2) investigate whether any act, policy, or practice of any country in the European Union or the United Kingdom has the effect of requiring or incentivizing the use or development of U.S. companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and (3) recommend (as part of a USTR report required by April 1) appropriate actions to counter any such practices under applicable authorities.

– USTR will identify and report by April 1 on tools the U.S. can use to secure among trading partners a permanent moratorium on customs duties on electronic transmissions.

– USTR, in consultation with the DOC and the senior counselor to the president for trade and manufacturing, will establish a process that allows U.S. businesses to report foreign tax or regulatory practices that disproportionately harm U.S. companies.

– Treasury, in consultation with USTR and DOC, will (1) determine whether any foreign country subjects U.S. citizens or companies (including in the digital economy) to discriminatory or extraterritorial taxes or has any tax measure in place that otherwise undermines the global competitiveness of U.S. companies, is inconsistent with any U.S. tax treaty, or is otherwise actionable under any U.S. tax-related legal authority and (2) include its determination in a report due by April 1 regarding the OECD agreement.

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