President Donald Trump has warned of imposing a 50% tax on goods imported from the European Union beginning June 1st. This proposed rate far exceeds his previous warning. In anticipation, the EU is formulating retaliatory measures which might involve conventional import duties on American merchandise; however, they are also exploring steps aimed at major U.S.-based technology companies.
On May 23, President Trump expressed his intentions, mentioning that the EU has been challenging to negotiate with and noting that their talks “are going nowhere.”
This news dealt a specific setback to European officials.
According to an internal memo dated May 14 (acquired by The Economist), this individual thought there was a possibility to reduce trade tensions as America started experiencing the effects of previous tariffs enacted under President Trump.
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The European Union has already drafted initial countermeasures that could impact U.S. goods worth approximately CAD 140 billion ($100 million) each year. These proposed actions include imposing conventional duties on American-made transport vehicles, farm produce, and even amusement park rides like roller coasters.
The EU additionally plans to restrict the sale of chemicals and metals.
, which many American mills depend on. Given the magnitude of Trump’s suggested tariffs, particularly the most recent ones, these actions would amount to merely a moderate response.
Digital services as the weak spot of the U.S.
Even though the European Union maintains a surplus in merchandise trade with America,
It purchases more services than it provides.
. As a result, the EU is contemplating more contemporary methods of reprisal. Trump criticizes the sanctions enforced by the EU on major U.S. technology corporations, yet the union has the potential to escalate its actions significantly.
U.S. digital services represent a vulnerable aspect.
that Europe could exploit.
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As per the World Trade Organization’s moratorium, “electronic transmissions” are free from tariffs, and enforcing fees on these could lead to significant bureaucratic and legal complications. Therefore, only three alternatives are left: implementing technical limitations, introducing new taxation methods, or stepping up legal actions.
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Concerning limitations, Stéphane Séjourné, who serves as the Vice President of the European Commission for the Internal Market, aims to implement “Purchase Europe” provisions for critical industries. Several nations are currently assessing their reliance on U.S.-based digital service suppliers.
The EU might strengthen its rules.
, particularly with the imminent release of a new set of cloud regulations. To address European worries, Microsoft has previously introduced “five digital commitments.” These pledges encompass assisting in building essential infrastructure along with safeguarding user privacy.
Taxes and lawsuits as alternate forms of leverage
Another area the EU could focus on is data storage regulations. An alternative approach might involve imposing taxes on digital services. These taxes generally aim at advertising revenue when it surpasses a specific level. This strategy tries to address the situation wherein technology firms report their earnings in regions with lower taxation instead of where actual value generation occurs or transactions take place. However, similar to tariffs, this poses challenges as well.
such taxes hit consumers
.
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Another option could be legal proceedings. On April 23, the Commission imposed fines of €200 (CAD 312) million on Meta and €500 (CAD 780) million on Apple for breaching the EU’s Digital Markets Act (DMA). A ruling concerning Alphabet is anticipated shortly.
The European Union might raise penalties down the line.
As the DMA gains more prominence, its sibling legislation, the Digital Services Act—which targets the removal of harmful content and disinformation—emerges as an additional tool. This act has previously been employed against Elon Musk’s platform X.
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