Trump threatens 50% tariffs. How might Europe strike back?
America’s tech giants are a point of vulnerability
The truce did not last long. On May 23rd President Donald Trump threatened to impose a tariff of 50% on imports from the European Union, more than double the size of his earlier threat of 20%. “Our discussions with them are going nowhere," he said. The bloc is “very difficult to deal with". Without progress, the levy will come into effect on June 1st.
Markets swooned once again in response. But Mr Trump’s announcement was a particular blow to European officials, who had been feeling cautiously optimistic. According to an internal memo from May 14th, seen by The Economist, they had believed that there was a chance of de-escalation, since America had begun to see the consequences of the president’s initial tariff rampage.
Maybe it was their counter-measure consultation that pushed him over the edge. The EU has studied options that could cover $100bn-worth of imports and exports a year, which it intends to impose should negotiations fail. These include 20th-century classics such as levies on American transport equipment, agricultural products and, fittingly, rollercoasters. The bloc also plans to restrict sales of chemicals and scrap metals that American smelters like. Considering the scale of Mr Trump’s proposed tariffs, especially his latest ones, these would represent only a modest counter-punch.
Now that Mr Trump has threatened to go big, how might Europe respond? Although it runs a surplus in goods with America, it buys more services than it sells. More quietly, therefore, the EU has been considering 21st-century forms of retaliation. Mr Trump complains about the EU’s penalties for the country’s tech giants—but the bloc could go much further. America’s digital services are a point of vulnerability.
Under a World Trade Organisation moratorium, “electronic transmissions" are exempt from tariffs; trying to impose levies on them directly would be a bureaucratic and legal nightmare. That leaves three options: technical restrictions, new taxes and ramped-up legal investigations.
Start with the restrictions. Stéphane Séjourné, the European Commission’s vice-president for the internal market, wants to introduce “Buy European" clauses for sensitive sectors. Indeed, some countries are already rethinking their exposure to American digital-cloud providers. Since it is soon to publish a rulebook for the cloud, the EU could get tough. Microsoft has tried to soothe European concerns by announcing “five digital commitments", which include helping to build infrastructure and protecting privacy.
The storage of data is another consideration. Data-transfer policy is the product of a tortuous back-and-forth between courts and policymakers; the current agreement depends on America maintaining strong protection standards. The Trump administration’s decision to remove Democratic members from a privacy-oversight board, and to demand that federal agencies submit significant decisions for presidential approval, might provide grounds for a reassessment. Max Schrems, an activist and lawyer who has brought down two previous agreements, argues that America’s actions are enough for the EU to pause the agreement even before the courts force its hand. Any move would come at a considerable cost, however. “Repatriating masses of data and the associated services would be very disruptive," notes Zach Meyers of the Centre on Regulation in Europe, a think-tank.
A second option would be to tax digital services. Such taxes typically target advertising revenue when it rises above a threshold. They represent an attempt to get around the fact that tech firms book profits in low-tax jurisdictions, and not where value is created or sales are made. The problem is that, much like tariffs, such taxes hurt consumers. Dominika Langenmayr of the Catholic University of Eichstätt-Ingolstadt and Rohit Reddy Muddasani of Vienna University of Economics and Business have studied Amazon’s fees and found a large pass-through to other sellers, who in turn charge shoppers more.
That leaves the legal-nuisance approach. On April 23rd the commission hit Meta and Apple with fines of €200m and €500m, respectively, for breaching the bloc’s Digital Markets Act, newish legislation that targets anti-competitive behaviour. A decision on Alphabet is imminent. The EU could dial up fines in the future, once the DMA is more established. The DMA’s sister bill, the Digital Services Act, which is intended to prevent harmful content and disinformation, is another possible weapon. It has already been used to go after X, Elon Musk’s social-media site.
European policymakers would be reluctant to politicise what they see as purely legal remedies. In truth, none of their options is very attractive. But they will be aware that China pushed Mr Trump to back down by promising painful retaliation. European officials will now be considering what they could threaten, in the hope that they do not have to follow through. Mr Trump has initiated an awkward, and really quite stupid, dance.
© 2025, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com
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