The Trump administration’s announcement last month that it was hiking tariffs on Europe is a wakeup call. For years, European governments have been treating U.S. tech companies as an ATM. Europe needs to come to the table on its discriminatory treatment of American businesses before the July 9 tariff deadline.
To hear Europe’s leaders howl over the latest tariff threat from President Trump, one might think that after putting the squeeze on the Old World, greedy Uncle Sam is coming back for more. The truth is that Eurozone bureaucrats have turned the targeting of U.S. companies into an art form.
Consider the Eurozone’s digital services taxes. Services such as content streaming, digital advertising and digital data provided by foreign companies working in Europe are taxed in addition to the tax they pay to their home countries. Naturally, as the global leader in tech innovation, it is American countries that disproportionately bear the burden.
Brussels bureaucrats further hone the targeting by applying these taxes exclusively to companies above an arbitrary revenue threshold, ensuring that only large American tech competitors are hit. Six of the seven “gatekeepers” subject to strict regulatory rules under the EU’s Digital Markets Act are American. Likewise, the overwhelming majority of the companies that are subject to the most strident provisions of the EU’s Digital Services Act are U.S. firms. Since 2018, U.S. companies have accounted for 83 percent of all EU data privacy fines.
While U.S. regulators are satisfied with regulating domestic companies, Europeans are not shy about their extraterritorial shakedowns. French officials regularly call their digital service tax a GAFA or GAFAM tax, a the acronym being a reference to "Google, Apple, Facebook, Amazon and Microsoft." Similarly, Europe’s special levy on streaming services has been dubbed the “Lex Netflix” after the American entertainment giant. Taxes and red tape might be economically-moribund Europe’s only growth export industry.
In a Truth Social post last month, Trump torched Europe’s “ridiculous corporate penalties” and “unfair and unjustified lawsuits against American companies.” America’s largest companies are singing the same tune. When EU regulators hit Apple and Meta with $800 million in fines last month, a Meta spokesperson called out the European money grab for what it is — “a multi-billion-dollar tariff” on American companies.
These fines do not take into account the enormous day-to-day compliance costs that U.S. firms must pay for the privilege of doing business in the Eurozone. Staying on top of EU digital rules runs Alphabet, Apple, Meta, Amazon and Microsoft $2.2 billion annually. American companies are forecasted to forgo more than $2 trillion of revenue due to Europe’s massive regulatory burden. Apple and Meta recently chose to delay the launch of new features on their products in Europe rather than run afoul of the Eurozone’s strict AI rules.
To those watching Trump closely over the last decade, last week’s escalation against Europe should have come as no surprise. In his first term, Trump initiated investigations into digital service taxes in Austria, France and Italy, issuing several reports on the findings. Since returning to office, Trump has complained that EU treats the U.S. worse than China.
What’s new is the convergence between the White House and Silicon Valley on Europe. Leading American tech executives have become increasingly outspoken on the regulatory hostility coming from Brussels. Meta’s Chief Global Affairs Officer Joel Kaplan recently criticized the European Commission for trying to “handicap successful American businesses while allowing Chinese and European companies to operate under different standards.” These concerns appear to be getting through to Team Trump. At last Friday’s press conference, Trump cited the $14.4 billion European court judgement against Apple that has been a major thorn in the tech giant’s side.
The Trump administration’s tariffs come at a near-term cost to American consumers. But it is equally clear that U.S. companies are getting the short end of the stick in Europe. The outcome of the trade negotiations between the U.S. and EU will tell whether the tariff bet pays off. A deal with Europe that’s limited to industrial goods isn’t good enough. The EU must end its discriminatory taxes and call a ceasefire on its lawfare against American innovation.
Michael Toth is a practicing lawyer and a research fellow at the Civitas Institute at the University of Texas at Austin.
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