President Trump issued a memorandum on February 21, 2025, directing the US Trade Representative (“USTR”) to make specific determinations regarding actions the administration may take in response to digital services taxes (“DSTs”) imposed by certain trading partners since 2019, as well as issue other recommendations to respond to trade and regulatory measures of other countries. The memorandum states that the Trump Administration’s policy shall be to impose tariffs and take other actions in response to taxes, regulations, and policies that foreign governments impose on US companies.
The memorandum directs the USTR to make the following determinations in response to DSTs imposed by certain trading partners:
- Determine whether to renew Section 301 investigations under the Trade Act of 1974 into DSTs applicable in France, Austria, Italy, Spain, Turkey, and the United Kingdom. These investigations were initiated by President Trump’s prior administration but were concluded without action in the Biden Administration.
- Determine whether to pursue a panel dispute under the US-Mexico-Canada Agreement in response to Canada’s imposition of the DSTs and initiate an investigation of the DSTs under section 302(b) of the Trade Act of 1974, which can lead to a Section 301 investigation under the Trade Act of 1974.
The memorandum also directs the USTR to include additional findings with respect to taxes, regulatory measures, and policies of other trading partners in the forthcoming reports under the America First Trade Policy, by undertaking the following:
- Jointly identify and recommend actions in response to trade and other regulatory practices by other countries that discriminate, disproportionately affect, or otherwise undermine the global competitiveness or operations of US companies.
- Investigate and recommend actions in response to acts, policies, or practices of any country in the EU or the United Kingdom that requires or incentivizes the use or development of US companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content.
- Determine whether any country subjects US citizens or companies to discriminatory or extraterritorial taxes, or has any tax measure in place that otherwise undermines the global competitiveness of US companies, that are in violation of US tax treaties or which are actionable under US law.
- Identify tools for the US to secure a permanent moratorium on customs duties on electronic transmissions with trading partners.
The memorandum also directs the USTR to establish a process for US companies to report to the USTR the tax and regulatory practices in foreign countries that are thought to disproportionately harm US companies.
While the memorandum identifies a number of measures that the Trump Administration is likely to target with tariffs, the full scope of such tariffs will depend on the USTR’s findings and recommendations. The memorandum imposes no deadline for the USTR to make specific findings or recommendations with respect to the Section 301 investigations and potential actions against Canada, while USTR’s recommendations with respect to other countries are likely to be announced on or around April 1, 2025, given the deadline of the relevant reports outlined in the America First Trade Policy.
