Trump warns of imposing 100% tariffs in response to digital services taxes.

      The ink had just dried. The EU had finalized a trade agreement with Washington, and the next day, Trump issued a warning that could jeopardize it.

      On Friday, the president shared this threat on Truth Social, stating that any country imposing a digital services tax on American companies would incur “a 100% TARIFF on any and all Goods sent to the United States.” He added that this would “supersede Trade Deals,” regardless of whether they were implemented or signed.

      The timing was significant. Just the day before, the EU had granted final approval for the Turnberry trade deal, which limits most tariffs on European exports to 15%. Trump's warning suggests it could be negated as soon as any member state enacts a digital tax.

      Understanding the digital services tax

      A digital services tax (DST) is a charge on the local revenue generated by major tech companies, most of which are American. Nations like France, Italy, Spain, and the UK have implemented such taxes, targeting companies like Google, Apple, Amazon, and Meta, which generate substantial sales in Europe but show little taxable profit there. Trump’s perspective is straightforward: he believes these taxes discriminate against U.S. companies and has vowed to penalize any nation that enforces them.

      Brussels remains resolute

      The response from Brussels was notably strong. The European Commission asserted that taxation is a “sovereign right.” They argued that their taxes were “non-discriminatory by design” and applied uniformly to all large enterprises, regardless of their origin. They warned that they would “respond swiftly and decisively” if pressured, as reported by Bloomberg. The EU continues to prefer a global solution for taxing the digital economy.

      This defiance is significant. Europe has dedicated years to affirming its authority to tax tech giants, and the Digital Markets Act is part of this initiative to regulate them. Backing down now would undermine the entire endeavor. European tech organizations have also cautioned that new U.S. tariffs would adversely affect both hardware and software on both sides of the Atlantic.

      A diminished threat than before

      However, there is a limitation for Trump—his tariff options are somewhat restricted. The U.S. Supreme Court invalidated his “reciprocal” tariffs earlier this year, ruling that he could not impose them unilaterally. It remains uncertain which legal authority would allow him to enforce a 100% tariff on numerous countries without Congressional approval. He managed to find a workaround for a temporary 10% global tariff, but implementing a broad new levy poses a greater challenge.

      Nonetheless, the threat is serious. Just this month, Trump warned France of a 100% tariff on its wines unless it rescinded a tax. Last year, Canada eliminated its own digital tax under similar pressure. This method has proven effective in the past against those willing to concede.

      Now the question is who will give in first. Canada backed down, but the EU has just entered a hard-negotiated trade agreement and is protective of its digital sovereignty, signaling its intent not to yield. The next action will determine whether Europe's right to tax Big Tech can withstand the impact of Trump’s tariffs.