Policy Alert: Digital Services Taxes & Other Regulations on US Tech Companies

Action: The President signed a Memorandum on “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties,” which focuses on US companies in the digital economy. It complains that “foreign governments have increasingly exerted extraterritorial authority over American companies, particularly in the technology sector,” with a particular focus on digital services taxes (DSTs) “that could cost American companies billions and that foreign government officials openly admit are designed to plunder American companies.” It also instructs the Office of the US Trade Representative to seek a “permanent moratorium on customs duties on electronic transmissions,” a goal of major US digital companies that could help retain their current positions in many foreign markets.

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The Memorandum also seeks to target regulations that purportedly discriminate against US companies, including regulations that are more burdensome for foreign than domestic companies and those that “limit cross-border data flows, require American streaming services to fund local productions, and charge network usage and Internet termination fees [.]”
The Memorandum suggests a potential reopening of investigations under Section 301 of the Trade Act of 1974 that the first Trump Administration brought against DSTs in France, Austria, Italy, Spain, Turkey, and the UK; opens the way for investigations of DSTs in any other country; and suggests convening a panel under the USMCA to investigate Canada’s DST.
While enforcement of many DSTs has been suspended pending the (now less likely) adoption of Pillar One of the OECD/G-20 Inclusive Framework (allocating taxing rights to countries in which multinational corporations operate), a number of countries around the world have imposed DSTs.
In language echoing the Vice President’s speech to the Munich Security Conference, the Memorandum requests agencies to “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 [US] companies products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and recommend appropriate actions to counter such practices” —implying the use of tariffs or other provisions of trade law.
The Administration also notes that regulations “that dictate how American companies interact with consumers” in the EU, including the Digital Markets Act (which regulates large “gatekeeper” platforms irrespective of nationality) and the Digital Services Act (which regulates large search engines, online intermediaries and marketplaces, and app stores) “will face scrutiny [.]” This is a direct challenge to the EU’s implementation of these acts, raising the prospect of tariffs or other measures if they are not changed.
The rhetoric of the Memorandum is quite strong: it states that foreign regulations and foreign taxes “violate American sovereignty and offshore American jobs” and speaks of “extortive fines and taxes.” A fact sheet states that the Administration will seek a “comprehensive approach to ensuring that U.S. products and services are governed by the United States of America, not foreign governments,” at least implicitly implying extraterritorial jurisdiction for the US.
The Memorandum continues a theme about the impact of foreign taxes on US companies: “when a foreign government, through its tax or regulatory structure, 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, my Administration will act, imposing tariffs and taking such other responsive actions necessary to mitigate the harm to the United States and to repair any resulting imbalance.”
The Administration states that it will consider taxes, regulations, intellectual property and “[a]ny other act, policy or practice” that “serves to undermine the global competitiveness” of US companies—a very broad mandate. In so doing, it raises the question whether the Memorandum seeks extraterritorial application of US tax laws even as it complains about other nations doing what it regards as the same behavior.

Policy Alert: Digital Services Taxes & Other Regulations on US Tech Companies

February 25, 2025

Key Insights

The Memorandum also seeks to target regulations that purportedly discriminate against US companies, including regulations that are more burdensome for foreign than domestic companies and those that “limit cross-border data flows, require American streaming services to fund local productions, and charge network usage and Internet termination fees [.]”

The Memorandum suggests a potential reopening of investigations under Section 301 of the Trade Act of 1974 that the first Trump Administration brought against DSTs in France, Austria, Italy, Spain, Turkey, and the UK; opens the way for investigations of DSTs in any other country; and suggests convening a panel under the USMCA to investigate Canada’s DST.

While enforcement of many DSTs has been suspended pending the (now less likely) adoption of Pillar One of the OECD/G-20 Inclusive Framework (allocating taxing rights to countries in which multinational corporations operate), a number of countries around the world have imposed DSTs.

In language echoing the Vice President’s speech to the Munich Security Conference, the Memorandum requests agencies to “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 [US] companies products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and recommend appropriate actions to counter such practices” —implying the use of tariffs or other provisions of trade law.

The Administration also notes that regulations “that dictate how American companies interact with consumers” in the EU, including the Digital Markets Act (which regulates large “gatekeeper” platforms irrespective of nationality) and the Digital Services Act (which regulates large search engines, online intermediaries and marketplaces, and app stores) “will face scrutiny [.]” This is a direct challenge to the EU’s implementation of these acts, raising the prospect of tariffs or other measures if they are not changed.

The rhetoric of the Memorandum is quite strong: it states that foreign regulations and foreign taxes “violate American sovereignty and offshore American jobs” and speaks of “extortive fines and taxes.” A fact sheet states that the Administration will seek a “comprehensive approach to ensuring that U.S. products and services are governed by the United States of America, not foreign governments,” at least implicitly implying extraterritorial jurisdiction for the US.

The Memorandum continues a theme about the impact of foreign taxes on US companies: “when a foreign government, through its tax or regulatory structure, 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, my Administration will act, imposing tariffs and taking such other responsive actions necessary to mitigate the harm to the United States and to repair any resulting imbalance.”

The Administration states that it will consider taxes, regulations, intellectual property and “[a]ny other act, policy or practice” that “serves to undermine the global competitiveness” of US companies—a very broad mandate. In so doing, it raises the question whether the Memorandum seeks extraterritorial application of US tax laws even as it complains about other nations doing what it regards as the same behavior.

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