On February 21, President Trump issued a memorandum entitled “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties.” The memorandum directs the Secretaries of the Treasury and Commerce Departments, the U.S. Trade Representative, and the Senior Counselor for Trade and Manufacturing to study imposing tariffs against trading partners in retaliation for implementing local taxes on digital services (technology companies doing business in those countries), or for implementing laws that require privacy protections for consumers of digital services in those countries.

Tax experts see digital services taxes as a second-best approach to achieving equitable taxation and avoiding tax avoidance by multinational corporations, in the absence of a multilateral tax agreement to ensure minimum corporate taxation. But President Trump has also withdrawn the United States from the OECD Global Tax Deal, in effect killing multilateral efforts to ensure large corporations pay their fair share of taxes instead of hiding income in offshore tax havens. U.S. “Big Tech” companies are the biggest beneficiaries of such a move, as they pay far below the U.S. and proposed global minimum corporate tax rates.

Impact: This memorandum threatens retaliatory tariffs against countries trying to hold Big Tech companies accountable to pay their fair share of corporate taxes.