Incoming Tariffs: Retaliatory Tariffs on Digital Service Tax Countries Revived By Trump Administration
On February 21, 2025, President Trump signed a new executive order (“EO”) that could lead to more tariffs. The EO could revive previous actions taken under Section 301 of the Trade Act of 1974, which could see tariffs up to 25% placed on a host of new countries.
Background
On Friday, February 21, 2025, the President signed an EO titled “Defending American Companies And Innovators From Overseas Extortion And Unfair Fines And Penalties.” The stated purpose of the EO is to target the practice of digital service taxes (“DSTs”), or taxes on revenues that companies generate from providing digital services over the internet. According to the EO, foreign DSTs and other regulations target American tech companies as opposed to local companies, and are extremely costly.
The Executive Order directs the United States Trade Representative (“USTR”) to determine whether to renew Section 301 investigations already conducted on France, Australia, Italy, Spain, Turkey, and the United Kingdom (“UK”).
The Executive Order also directs the USTR to determine whether to open a new investigation on any other country, and whether to pursue a United -States-Mexico-Canada agreement remedy against Canada.
The Previous Section 301 Investigations
During the first Trump Administration, the USTR conducted investigations on multiple enacted and proposed DST legislations across the globe. Some investigations, such as those against the EU, Brazil, Czech Republic, and Indonesia ended without further action being taken.
Others, such as those against France, Australia, India, Italy, Spain, Turkey, and the UK, resulted in action taken by the USTR. For example, in the case of the UK, the USTR determined to implement a 25% tariff on certain goods from the UK.
Ultimately, no tariffs were imposed under these investigations, as the United States reached agreements with France, Austria, Italy, Spain, the UK, Turkey, and India. However, the USTR indicated that further monitoring would be conducted to determine whether the compromises were a satisfactory remedy.
Going Forward
With the coming of this new EO, the USTR will be taking steps to review the DST polices of those countries previously subject to investigation, and others. For countries that have not been investigated yet, this could be a lengthy process. In the case of previously investigated countries, it is unlikely that the USTR would need to conduct a new investigation to impose tariffs. Therefore, be sure to watch out in the coming days: as some important U.S. trade partners could be slapped with tariffs as high as 25%.
As new tariff regulations continue to evolve, navigating these changes requires experienced legal counsel. At Liang + Mooney, PLLC, our seasoned tariff lawyers can answer your questions and concerns with sophisticated legal solutions. If you seek strategic counsel and insight into how these changes could affect your operations, we invite you to contact us to schedule a consultation.