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Digital service taxes a longstanding trade irritant for US

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Countries including France, Canada, UK have DSTs

(Adds Trump quotes, details throughout on digital tax disputes)

By Nandita Bose, David Lawder and Steve Holland

WASHINGTON, Feb 21 (Reuters) - President Donald Trump

said on Friday that he would sign a memorandum to impose tariffs

on countries that levy digital service taxes on U.S. technology

companies.

A White House official, providing details of the order, said

Trump was directing his administration to consider responsive

actions like tariffs "to combat the digital service taxes

(DSTs), fines, practices, and policies that foreign governments

levy on American companies."

"President Trump will not allow foreign governments to

appropriate America's tax base for their own benefit," the

official said.

The memo directs the U.S. Trade Representative's office

to renew digital service taxes investigations that were

initiated during Trump's first term, and investigate any

additional countries that use a digital tax "to discriminate

against U.S. companies," the official said.

Trump, asked at the White House if he would sign a tariff

order on digital taxes, told reporters: "We are going to be

doing that, digital. What they're doing to us in other countries

is terrible with digital, so we're going to be announcing that,

maybe today."

Trump said last week that he would impose tariffs on

Canada and France over their digital services taxes, and a White

House fact sheet released at the time said that "only America

should be allowed to tax American firms."

It complained that Canada and France used the taxes to each

collect over $500 million per year from U.S. companies.

"Overall, these non-reciprocal taxes cost America's firms

over $2 billion per year. Reciprocal tariffs will bring back

fairness and prosperity to the distorted international trade

system and stop Americans from being taken advantage of," said

the fact sheet. It gave no further details.

LONGSTANDING IRRITANT

The digital service taxes aimed at U.S. tech giants

including Alphabet's Google, Meta's Facebook,

Apple ( AAPL ) and Amazon ( AMZN ) have been a source of trade

disputes for years.

Britain, France, Italy, Spain, Turkey, India, Austria and

Canada have imposed the taxes, levied on revenues earned from

digital services sold within their borders.

The U.S. Trade Representative's office during Trump's first

term found them to discriminate against U.S. companies in its

investigations and readied retaliatory tariffs.

President Joe Biden's trade chief, Katherine Tai, in 2021

followed up on these probes and announced 25% tariffs on over $2

billion worth of imports from six countries, but immediately

suspended them to allow negotiations on a global tax deal to

continue.

Those negotiations led to a 15% global corporate minimum tax

that the U.S. Congress never ratified. Talks on a second

component, meant to create an alternative to the digital taxes,

have largely ground to a halt with no agreement.

Trump on his first day in office effectively pulled the U.S.

out of the global tax arrangement with nearly 140 countries,

declaring that the 15% global minimum tax has "no force or

effect in the United States" and ordering the U.S. Treasury to

prepare options for "protective measures."

A new Trump order could allow USTR'S retaliatory duties to

be reactivated. They were designed to offset the amount of

digital service taxes collected.

In 2021 USTR said it would impose 25% tariffs on about $887

million worth of goods from Britain, including clothing,

footwear and cosmetics, and on about $386 million worth of goods

from Italy, including clothing, handbags and optical lenses.

USTR said at the time it would impose tariffs on goods worth

$323 million from Spain, $310 million from Turkey, $118 million

from India and $65 million from Austria. USTR separately

suspended tariffs on $1.3 billion worth of French cosmetics,

handbags and other goods.