US President Trump Digital Services Taxes reciprocal tariff review

Presidential memo orders review of remedies against global digital taxes targeting US tech

Canada, France, Italy, Spain, Turkey & UK DST’s singled out

On 21 February 2025, US President Trump signed an order to investigate potential tariff retaliations against countries which have implemented Digital Services Taxes. The memo targets 6 countries’ DST’s: France; the UK; Italy; Canada, Spain, and Turkey. A public consultation starts 6 March, and April 2025 to initial outcome will be publised as part of the America First Trade Policy Memorandum. The review has already sparked a likely UK DST withdrawal and Indian Equalisation Levy for fear of tariffs.

See our global DST tracker which follows around 30 DST’s which are revenue taxes on social media, search engine or online marketplace services. They effectively act as an import tariff on digital services, and the US is upset that their high annual thresholds mean they largely discriminate against US digital giants like Google, Meta, Apple and Amazon. Countries implementing DST’s argue the reflect the shortcomings of the 100+ year-old existing global tax settlement which is unable to fairly tax modern digital offerings.

US tariff retaliations as it pulls out of OECD negotiations?

On 20 January 2025, President Trump withdrew the US from the global digital tax reform negotiations – OECD Pillar 1 reform – which sort to settle global taxing rights on cross-border digital services. This move to review DST’s follows potential retaliative tariffs against VAT announced by President Trump last week.

The review seems to go beyond just DST’s to evaluate any charge on US-produced content. This could include content levies like the French music streaming levy .

The 2016-20 first Trump administration investigated DST’s, concluded that they constituted violations of trade agreements with the United States. The Trump and following Biden administrations both imposed retaliatory tariffs in response, but suspended them pending the pillar 1 negotiations.

President Trump launches DST review – Feb 2025

On 21 February 2025, President Trump signed a Presidential Memorandum directing the United States Trade Representative (USTR) to review and potentially renew investigations into DSTs imposed by key US trading partners. The memorandum specifically targets France, the UK, Italy, Spain, Austria, Turkiye, and Canada. It aims to identify policies that discriminate against US companies, burden US digital commerce, and undermine their global competitiveness.

USTR DST investigation

1. Review and Renewal of DST Investigations:
   • The USTR will consider renewing DST investigations under Section 301 of the Trade Act of 1974, which were initiated during Trump’s first term.
   • These taxes were previously found to violate trade agreements, leading to retaliatory tariffs, which were later suspended pending negotiations.
2. Withdrawal from OECD Tax Reform Negotiations:
   • On 20 January 2025, President Trump withdrew the US from the OECD’s global digital tax reform talks.
3. Identifying Discriminatory Policies:
   • The USTR, in collaboration with the Treasury and Commerce Departments, will examine foreign tax policies that:
     • Discriminate against US companies.
     • Inhibit US businesses’ growth or intended operations.
     • Jeopardize US intellectual property.
     • Undermine US companies’ global competitiveness.

Additional Considerations:

• Canada’s DST: The USTR will assess whether to initiate a dispute resolution panel under the United States-Mexico-Canada Agreement (USMCA) over Canada’s DST.
• EU and UK Policies: The USTR will investigate whether EU or UK regulations pressure US companies to modify content moderation, affecting freedom of speech and political engagement.
• Potential Tax Actions: The USTR and Treasury will evaluate whether any foreign tax policy violates US tax treaties or qualifies for retaliatory action under the Internal Revenue Code.
• Securing a Moratorium on Digital Tariffs: The memorandum calls for efforts to establish a permanent ban on customs duties for electronic transmissions, following the WTO’s temporary moratorium extension until 2026.

March 2025 Public consultation

• The USTR has opened a comment period until 11 March 2025, seeking feedback on unfair trade practices.
• The Federal Register Notice encourages submissions, especially concerning major G20 economies and countries with large US trade deficits.

The findings from this review will be published in April 2025 as part of the America First Trade Policy Memorandum.

Levy on untaxed imported digital services

DST’s seek to tax the revenues of mostly US digital giants such as Apple, Amazon, Google and Meta. They apply where in-scope services are provided from abroad, and which therefore are not subject to regular local corporate income tax. They are in effect digital service tariffs, particularly with high eligibility thresholds which exclude all but the largest US-based businesses.

They reflect the archaic basis of the existing global taxing rights which only are triggered when providers have a local presence – employees, facilities etc. Many digital services providers avoid this criteria by supplying from offshore and so avoid income taxes.

The UK is already reported to be reconsidering its £700 million-per-annum DST, and withdrawing it to avoid earlier threats of US retaliation.

Services subject to DST

DST’s are typically around 3%, and levied on revenues derived from the following specific categories of digital services:

1. Online Advertising Services: Revenue from placing targeted advertising on a digital interface based on data gathered from users.
2. Multisided Digital Interfaces: Revenues from the provision of a digital platform facilitating interaction between users, which may result in the supply of goods or services.
3. Transmission of User Data: Revenues derived from selling or transferring data collected about users and generated through their activities on digital platforms.

Europe Digital Services Taxes (DST)

Asia Pacific Digital Services Taxes (DST)

Africa & Middle East Digital Services Taxes (DST)