The European Union (EU) is contemplating imposing levies on U.S. tech giants like Meta Platforms (NASDAQ:META) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) if the ongoing tariff negotiations with the Trump administration fail to be resolved.
What Happened: Ursula von der Leyen, the EU Commission president, told the Financial Times that the EU is seeking a balanced agreement with Washington during a 90-day pause in additional tariffs. However, if the talks fail, the EU is ready to expand the trade war to services, potentially including a tax on digital advertising revenues.
The measure would involve a tariff implemented uniformly across the single market, unlike digital sales taxes, which are levied separately by individual member states, explained Von der Leyen.
Von der Leyen warned, “We are developing retaliatory measures,” which may involve the first application of the bloc's anti-coercion instrument, which has the authority to target services exports. Depending on how the negotiations unfold, this could lead to tariffs on services trade between the U.S. and the EU.
Last Thursday, the EU Commission suspended its planned response to U.S. steel and aluminium tariffs, citing the necessity of negotiations with Washington. These measures would have impacted approximately €21 billion ($23.90 billion) worth of U.S. imports, including items like orange juice, poultry and yachts.
If negotiations fail, the EU will reinstate retaliatory measures against the steel and aluminium tariffs by the U.S.. Von der Leyen also warned that additional countermeasures could target the U.S.’s large services trade surplus with the EU.
Why It Matters: This potential move by the EU comes in the wake of ongoing global trade tensions. Kevin O'Leary, of Shark Tank fame, had suggested that the EU's "zero-for-zero" tariff proposal on industrial goods offered President Donald Trump a significant opportunity to de-escalate trade tensions.
Furthermore, last week, the EU and China agreed to explore setting minimum prices for Chinese-made electric vehicles as an alternative to tariffs imposed last year. This backdrop of events underscores the EU’s active efforts to negotiate and find alternatives to tariff impositions, highlighting the gravity of the current situation with the US.
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