US sets and suspends tariffs on six countries over digital taxes

The United States has announced 25% tariffs on over $2 billion worth of imports from six countries over their digital services taxes. But they immediately suspended the duties to allow time for international tax negotiations to continue.

The U.S. Trade Representative’s office said that it had approved the threatened tariffs on goods from Britain, Italy, Spain, Turkey, India and Austria. This approval was after a Section 301 investigation. They concluded that their digital taxes discriminated against U.S. companies. USTR published lists of imports from the six countries that would face tariffs if international tax negotiations fail to reach a solution that prohibits countries from imposing unilateral digital services taxes.

They would impose 25% tariffs on about $887 million worth of goods from Britain. This includes clothing, overcoats, footwear and cosmetics etc. And also, about $386 million worth of goods from Italy, including clothing, handbags and optical lenses also comes under this. USTR also said that it would impose tariffs on goods worth $323 million from Spain, $310 million from Turkey, $118 million from India and $65 million from Austria also.

The potential tariffs that are based on 2019 import data, aim to equal the amount of digital taxes that would be collected from U.S. firms. This move underscores the U.S. threat of retaliation, as finance leaders from G7 countries prepare to meet in London. This meeting is to discuss the state of tax negotiations that includes taxation of large technology companies and a U.S. proposal for a global minimum corporate tax.

U.S. tariffs threatened against France over its digital tax were suspended. This allows time for negotiations. Trade Representative Katherine Tai of US said that she was focused on finding a multilateral solution to digital taxes and other international tax issues. And also, she was committed to reaching a consensus through the OECD and G20 negotiations. Tai even added that today’s actions provide time for those negotiations to continue to make progress while maintaining the option of imposing tariffs under Section 301 if warranted in the future.

Tai faced a deadline to announce the tariff action under the Section 301 probes. A British government spokesperson said that the UK tax was aimed at ensuring tech firms pay their fair share of tax and was temporary. He added that their digital services tax is reasonable, proportionate and non-discriminatory. They are working positively with international partners to find a global solution to this problem. They will remove the DST when that is implemented.