It didn't take long for President Donald Trump to make fresh demands of the European Union and imperil a nascent trade agreement.
On Tuesday, the president cast the trade agreement with the European Union as a "done deal" during a three-hour long Cabinet meeting open to reporters. Within the same day, however, he lambasted foreign governments that levy digital service taxes or otherwise regulate U.S. tech companies. He threatened to enact "substantial additional tariffs" in response, coupled with export restrictions.
Trump didn't single out the 27-member bloc for punishment in the social media post. But it serves as a fresh reminder the EU's agreement with the U.S. isn't fully baked yet, and Trump is willing to gamble his trade agreement on their regulation of U.S. tech companies.
"Trump clearly appreciates the support he got as re-election from the U.S. tech sector," Peter Harrell, an ex-White House aide for international economics during the Biden administration, told Quartz. Tech industry executives poured at least $273 million into Trump's campaign, The Guardian reported.
Harrell described the choices facing foreign governments as "strike a deal and hope it sticks. Or don't strike a deal and it turns into a big, great fight. But we might as well at least try."
Over the past month, progress on the U.S and EU trade deal crept along from a handshake to a formal outline. "The United States and the European Union commit to address unjustified digital trade barriers," the formal fact sheet said, ensuring it remains an open point of discussion between Washington and Brussels.
Scores of countries, including many in Europe, have adopted or are pursuing new rules to regulate tech giants like Meta, Google, and Amazon. Digital taxes in particular were a source of friction in the first Trump administration. These are taxes on certain revenue streams from U.S. tech companies operating abroad.
In 2019, Trump threatened to impose tariffs on France for imposing a 3% digital tax, provoking a standoff that ended with no change from Paris. More recently, Canada yanked a similar proposed digital tax in June after Trump warned of ratcheting up existing tariffs.
Eleven countries in the European Union have adopted up to a 3% digital tax, including Italy and Spain, per VATCalc, an organization tracking global digital taxes. The United Kingdom also has a 2% digital tax in place. The German government is weighing a 10% digital tax, which would be among the steepest ones globally.
Digital service taxes aren't the only area of contention. In addition, the EU's Digital Services Act has attracted scrutiny from the Trump administration. Vice President J.D. Vance has criticized the DSA over social media, arguing the measure saddles U.S. tech companies with burdensome rules that stifle free speech on their platforms.
The EU has held firm on the full suite of digital rules up to now. Member countries are wary of the U.S. encroaching on EU decision-making but are also leaving the door open to iron out their differences with the U.S.
“It is the sovereign rights of the EU and its member states to regulate economic activities on our territory, which are consistent with our democratic values," said EU Commission spokesperson Paulo Pinho at a recent news briefing.