President Donald Trump forced Europe to accept a 15% tariff on most exports to the US. But he didn’t win concessions on the issues angering US tech: digital taxes and onerous digital regulations, not to mention forcing Europeans to pay higher prices for drugs.
The upshot?
Americans could fork out additional dollars for their BMWs and Mercedes, not to mention their Parmesan cheese and Iberico ham. The trade truce will fail, overall, to boost US exports to Europe, which primarily are services and largely tech-related. Tariffs do not hold back sales of Google ads, Netflix subscriptions, and Amazon cloud storage. Non-tariff barriers do.
Start with digital regulations. For months, the Trump administration has crusaded against the Digital Services Act, which mandates content moderation, calling it “censorship.” Congressman Jim Jordan, author of the recent report attacking the DSA, recently brought his campaign to Brussels. The trade deal makes no mention of European “censorship.”
The Digital Markets Act targets tech for anti-competitive behavior. Over the past few months, European regulators have imposed hundreds of millions of euros in fines against Apple, Google, and Meta. Apple is being forced to lower charges on its app stores. Google must stop favoring its products in search. Meta must narrow its targeted advertising. Under the trade agreement, these changes stand.
Europe’s AI Act imposes transparency and safety requirements on the development of revolutionary technology. After months of complaining that the regulation is premature, most US tech companies have vowed to comply. Google announced this week that it would join the bloc’s AI pact.
On pharmaceuticals, the deal could boomerang. President Trump has long complained that Europeans, covered by state-run health programs, pay much lower prices for their drugs than Americans, effectively free-riding on US consumers. Instead of lowering these prices, it could raise them for Americans, because of a tariff on European pharmaceutical exports.
Admittedly, tech did score some potential victories. European telephone operators have been pushing hard for US tech to pay them extra fees, which they call “fair share, for using their connections, arguing that Netflix, YouTube, Facebook, and other US services disproportionately hog their networks.
A White House fact sheet asserted that Europe “will not adopt or maintain network usage fees. Furthermore, the United States and the European Union will maintain zero customs duties on electronic transmissions.”
Even so, Europe left a back door open to imposing “fair share.” Instead of a flat fee, European officials have floated the idea of forcing tech companies in the upcoming Digital Networks Act to accept arbitration if they cannot agree with the telcos on network fees.
US chipmakers also could win. Europe committed to purchasing $40 billion of GPU chips from Nvidia and AMD for its planned AI gigafactories. But frankly, Europe has no alternative non-American suppliers. Under the deal, too, European chipmaking equipment will be exempt from the deal’s 15% baseline tariff on EU goods. Dutch chip printing machine maker ASML is a leading manufacturer and exporter of the multi-million-euro apparatuses.
The overall message is clear: US tech companies will have to play by European, not US, rules to do business in Europe. Digital platforms will have to pay digital taxes. Netflix and other video streamers will have to buy European content. Two days after the trade framework was signed, Ireland’s High Court ruled against Elon Musk’s X, requiring the social media platform to impose strict age requirements.
US tech will need to convince Europeans that its regulations are overkill and counterproductive. This could happen. Europeans themselves are realizing that too much regulation is hurting their competitiveness. Former Italian Prime Minister. Mario Draghi’s competitiveness report urges the continent to loosen and simplify the rules and to jump on the digital bandwagon.
During the frenetic negotiations over tariffs, the EU insisted that its regulations were off the table. In the end, that proved true. The best hope for change in Europe comes less from American jawboning than from European reformers.
William Echikson is a non-resident Senior Fellow at the Center for European Policy Studies and editor of the Bandwidth blog.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
