Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties
This Presidential Memorandum directs several federal agencies to take action against foreign governments imposing discriminatory taxes and regulations on American companies, particularly in the technology sector.
The administration will use tariffs and other responsive actions to mitigate harm and restore balance, considering discriminatory taxes, restrictive regulations, jeopardizing intellectual property, and undermining global competitiveness.
Agencies are tasked with investigating specific countries' practices and recommending countermeasures, aiming to prevent the transfer of funds and intellectual property to foreign governments and promote fair competition.
Arguments For
Protecting US economic interests: The memorandum aims to safeguard the US economy by preventing the transfer of significant funds and intellectual property to foreign governments through unfair practices.
Promoting fair competition: It seeks to level the playing field for American companies operating internationally by countering discriminatory taxes and regulations.
Maintaining national security: The actions taken aim to prevent the compromising of sensitive information and the offshoring of American jobs by hostile foreign governments.
Legal precedent: This builds upon prior executive actions regarding unfair trade practices, and utilizes existing trade authorities (Section 301 of the Trade Act of 1974) for investigations and retaliatory measures.
Deterrence: The threat of tariffs and other retaliatory measures aims to deter other countries from adopting similar discriminatory policies in the future.
Arguments Against
Potential for trade wars: Retaliatory tariffs could escalate trade tensions and lead to retaliatory measures from other countries significantly damaging global trade.
Impact on consumers: Tariffs could increase prices for consumers in the US, reducing consumer surplus and harming purchasing power.
Limited effectiveness: It's unclear if the threat alone will be sufficient to reform foreign policies without escalating tensions.
Unintended consequences: Retaliatory measures might harm US companies operating in those foreign markets beyond the intended scope.
Alternative approaches: Diplomacy and international collaboration might achieve similar outcomes while avoiding punitive measures and reducing economic risk.
Section 1. Purpose. In recent years, the gross domestic product of the United States’ digital economy alone, driven by cutting-edge American technology companies, has been bigger than the entire economy of Australia, Canada, or most members of the European Union. Instead of empowering their own workers and economies, foreign governments have increasingly exerted extraterritorial authority over American companies, particularly in the technology sector, hindering these companies’ success and appropriating revenues that should contribute to our Nation’s well-being, not theirs.
Beginning in 2019, several trading partners enacted digital services taxes (DSTs) that could cost American companies billions of dollars and that foreign government officials openly admit are designed to plunder American companies. Foreign countries have additionally adopted regulations governing digital services that are more burdensome and restrictive on United States companies than their own domestic companies. Additional foreign legal regimes limit cross-border data flows, require American streaming services to fund local productions, and charge network usage and Internet termination fees. All of these measures violate American sovereignty and offshore American jobs, limit American companies’ global competitiveness, and increase American operational costs while exposing our sensitive information to potentially hostile foreign regulators.
My Administration will not allow American companies and workers and American economic and national security interests to be compromised by one-sided, anti-competitive policies and practices of foreign governments. American businesses will no longer prop up failed foreign economies through extortive fines and taxes.
This section establishes the rationale for the memorandum.
It highlights the significant contribution of the US digital economy and criticizes foreign governments for imposing what are described as unfair digital services taxes (DSTs) and other regulations on American companies.
These actions are framed as harming US economic interests and violating American sovereignty.
The administration asserts it will not tolerate these practices.
Sec. 2. Policy. It is the policy of my Administration that where a foreign government, through its tax or regulatory structure, imposes a fine, penalty, tax, or other burden that is discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities, my Administration will act, imposing tariffs and taking such other responsive actions necessary to mitigate the harm to the United States and to repair any resulting imbalance.
In taking such responsive action, my Administration shall consider:
(a) taxes imposed on United States companies by foreign governments, including those that may discriminate against United States companies;
(b) regulations imposed on United States companies by foreign governments that could inhibit the growth or intended operation of United States companies;
(c) any act, policy, or practice of a foreign government that could require a United States company to jeopardize its intellectual property; and
(d) Any other act, policy, or practice of a foreign government that serves to undermine the global competitiveness of United States companies.
This section outlines the administration's policy response.
It states that if a foreign government’s taxes or regulations are discriminatory or designed to unfairly benefit their domestic entities, the administration will retaliate (e.g., through tariffs).
It identifies specific factors for consideration when deciding on a response, including discriminatory taxes, regulations hindering growth, and policies that jeopardize intellectual property or competitiveness.
Sec. 3. Agency Responsibilities. (a) The United States Trade Representative shall determine, in accordance with applicable law, whether to renew investigations under section 301 of the Trade Act of 1974 (19 U.S.C. 2411) of the DSTs of France, Austria, Italy, Spain, Turkey, and the United Kingdom, which were initiated under my Administration on July 16, 2019, and June 5, 2020. If the United States Trade Representative determines to renew such investigations, he shall take all appropriate and feasible action in response to those DSTs.
(b) The United States Trade Representative shall determine, consistent with section 302(b) of the Trade Act of 1974 (19 U.S.C. 2412(b)) (section 302(b)), whether to investigate the DST of any other country that may discriminate against United States companies or burden or restrict United States commerce. He shall further determine whether to pursue a panel under the United States-Mexico-Canada Agreement on the DST imposed by Canada and whether to investigate Canada’s DST under section 302(b). In making these determinations, the United States Trade Representative shall consult with the Secretary of the Treasury, as appropriate.
(c) The Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative shall jointly identify trade and other regulatory practices by other countries, including, without limitation, those described in section 2 of this memorandum, that discriminate against, disproportionately affect, or otherwise undermine the global competitiveness or intended operation of United States companies, in the digital economy and more generally, and recommend to me appropriate actions to counter such practices under applicable authorities. The United States Trade Representative shall include the results of this review as part of the report required in section 5(c) of the Presidential Memorandum of January 20, 2025 (America First Trade Policy) (America First Trade Policy Memorandum).
(d) The Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative shall investigate whether any act, policy, or practice of any country in the European Union or the United Kingdom has the effect of requiring or incentivizing the use or development of United States companies’ products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content, and recommend appropriate actions to counter such practices under applicable authorities. The United States Trade Representative shall include the results of this review as part of the report required in section 5(c) of the America First Trade Policy Memorandum.
(e) The Secretary of the Treasury, in consultation with the Secretary of Commerce and the United States Trade Representative, shall determine whether any foreign country subjects United States citizens or companies, including, without limitation, in the digital economy, to discriminatory or extraterritorial taxes, or has any tax measure in place that otherwise undermines the global competitiveness of United States companies, is inconsistent with any tax treaty of the United States, or is otherwise actionable under section 891 of title 26, United States Code, or other tax-related legal authority. The Secretary of the Treasury shall include the results of this determination as part of the report required in section 2 of the Presidential Memorandum of January 20, 2025 (The Organization for Economic Co-Operation and Development (OECD) Global Tax Deal).
(f) The United States Trade Representative shall identify tools the United States can use to secure among trading partners a permanent moratorium on customs duties on electronic transmissions. The United States Trade Representative shall include the results of this review as part of the report required in section 5(c) of the America First Trade Policy Memorandum.
(g) The United States Trade Representative, in consultation with the Secretary of Commerce and the Senior Counselor to the President for Trade and Manufacturing, shall establish a process that allows American businesses to report to the United States Trade Representative foreign tax or regulatory practices that disproportionately harm United States companies.
This section details the responsibilities of various agencies.
The US Trade Representative (USTR) is tasked with renewing investigations into existing DSTs, investigating other countries' DSTs, and identifying tools to eliminate customs duties on electronic transmissions.
The USTR, Commerce Secretary and Treasury Secretary will jointly identify discriminatory practices and recommend countermeasures, and will also investigate practices that may undermine free speech.
The Treasury Secretary will also determine if any foreign country's tax measures are actionable under US law.
Finally, a reporting process for US businesses to report harmful foreign tax and regulatory practices is established.
Sec. 4. General Provisions. (a) Nothing in this memorandum shall be construed to impair or otherwise affect:
(i) the authority granted by law to an executive department or agency, or the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.
(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
(d) The United States Trade Representative is authorized and directed to publish this memorandum in the Federal Register.
This section includes general provisions clarifying that the memorandum does not supersede existing laws or agency authorities; implementation is subject to available funding; and the memorandum does not create any legally enforceable rights.
The memorandum also mandates its publication in the Federal Register.