Fact Sheet: President Donald J. Trump Issues Directive to Prevent the Unfair Exploitation of American Innovation

Fact Sheets

TLDR

This “fact” sheet for a recent memorandum mischaracterizes Digital Service Taxes as unfair extortion when they are legitimate 3% taxes on large tech companies operating in foreign markets. The memo appears timed to protect specific U.S. tech giants like Meta and Google from regulations like the EU’s Digital Markets Act, while ignoring that countries have sovereign rights to tax business activities within their borders. The total cost to U.S. firms is ~$2B annually, and the order risks triggering retaliatory measures that could harm the U.S. economy.

The “fact” sheet is for a recent executive memorandum that purports to focus on protecting American digital companies from foreign taxation and regulation.

It misrepresents Digital Service Taxes as “extortion” when they are legitimate tax measures designed to address a real problem: large tech companies operating in foreign markets while avoiding traditional corporate taxes. These taxes typically only affect companies with significant global revenues and local market presence, not all U.S. businesses.

The memorandum’s central premise about “safeguarding America’s sovereignty” is fundamentally flawed:

  • Countries have the sovereign right to tax business activities within their borders
  • The claim that companies “are generally not otherwise subject to foreign jurisdiction” is false — they actively participate in and profit from these markets
  • The total cost to U.S. firms is approximately $2 billion annually, not the catastrophic impact suggested

The timing and focus of this memo appears designed to protect specific tech giants:

  • Coincides with Trump’s AI “Stargate” initiative involving OpenAI
  • Targets regulations like the EU’s Digital Markets Act that aim to ensure fair competition
  • Particularly benefits companies like Meta, Google, and Amazon that have faced international scrutiny

The fact sheet makes several misleading economic claims:

  • “Unfair exploitation”: DSTs are typically around 3% of revenue from specific digital services
  • “Failed economies”: Affects advanced economies like UK, France, Canada
  • “America First”: Could trigger retaliatory measures harming U.S. economy

The memorandum obscures important context:

  • Trump withdrew from global OECD Pillar 1 negotiations that would have created a standardized approach
  • Previous tariff threats under Section 301 were suspended to allow for diplomatic solutions
  • Many countries implemented DSTs precisely because traditional corporate tax systems failed to address digital economy challenges

The referenced memorandum appears more focused on protecting specific tech allies and campaign supporters than addressing legitimate international tax policy concerns.

SAFEGUARDING AMERICA’S SOVEREIGNTY OVER ITS ECONOMY:

Today, President Donald J. Trump signed a memorandum to defend American companies and innovators from overseas extortion.

  • This Administration will consider responsive actions like tariffs to combat the digital service taxes (DSTs), fines, practices, and policies that foreign governments levy on American companies.
    • DSTs allow foreign governments to collect tax revenue from American companies simply because they operate in foreign markets, even though those companies are generally not otherwise subject to foreign jurisdiction.
  • President Trump will not allow foreign governments to appropriate America’s tax base for their own benefit.
  • This memorandum directs the United States Trade Representative (USTR) to renew the DST investigations under Section 301 that were initiated during President Trump’s first term, and investigate any additional countries that use a DST to discriminate against U.S. companies.
  • The Administration will review whether any act, policy, or practice in the European Union or United Kingdom incentivizes U.S. companies to develop or use products and technology in ways that undermine free speech or foster censorship.
  • Foreign governments will invite responsive actions from the Administration if they take steps to coerce U.S. businesses to hand over their intellectual property.
  • Regulations that dictate how American companies interact with consumers in the European Union, like the Digital Markets Act and the Digital Services Act, will face scrutiny from the Administration.

DEFENDING AMERICAN COMPANIES FROM EXTORTION:

President Trump’s memorandum unveils a comprehensive approach to ensuring that U.S. products and services are governed by the United States of America, not foreign governments.

  • Rather than position their own companies and workers for success, foreign governments have been taxing the success of America’s companies and workers.

    • America’s economy will not be a source of revenue for countries that have failed to cultivate economic success of their own.

  • To the detriment of America’s economy, in recent years, a number of our trading partners began enacting DSTs to raise revenue for their own government spending.

    • Foreign governments could collect billions in DSTs from U.S. companies annually.

  • This exploitation goes beyond DSTs to other forms of unfair fines, practices, and penalties that undermine the ability of American companies to operate as intended and force them to incur additional compliance costs, lowering U.S. global economic competitiveness.

  • In terms of GDP, the United States digital economy has been larger than most countries’ entire economy in recent years, including Australia, Canada, and most members of the European Union.

  • America’s digital economic dominance is driven by cutting-edge American tech companies, and the American innovation and workers behind them.

RESTORING THE ENTREPRENEURIAL SPIRIT OF AMERICA:

President Donald J. Trump has a track record of protecting American manufacturers and empowering American innovators and workers.

  • During his first administration, President Trump initiated Section 301 cases against DSTs and negotiated platinum-standard rules for digital trade with Japan and separately through the USMCA.

  • President Trump demonstrated in his first term that punitive measures like tariffs strengthened the U.S. economy and brought back American industry.

  • Just last week, President Trump announced the “Fair and Reciprocal Plan” on trade to restore fairness in U.S. trade relationships and counter non-reciprocal trade agreements.

  • On Day One, President Trump initiated his America First Trade Policy to make America’s economy great again.