Donald Trump's Latest Tariff Threats and Digital Service Tax Plan
On Friday, President Donald Trump oversaw the swearing-in of Howard Lutnick as the new Commerce Secretary and confirmed his intent to consider digital service taxes akin to tariffs. This move is part of Trump's ongoing trade war efforts aimed at addressing perceived unfair practices by other countries.
Reciprocal Tariffs and Digital Service Taxes
Trump vowed to impose reciprocal tariffs "soon," targeting foreign taxes on U.S. technology companies. He described the practice by other countries as "terrible on digital" and indicated that tariffs could be implemented in retaliation. The executive order on this matter will instruct the U.S. Trade Representative to study the issue of digital service taxes.
Economic Concerns and Consumer Sentiment
Despite Trump's tariff announcements, consumer sentiment in the United States has declined, driven partly by concerns about inflation. The latest University of Michigan survey suggests that higher inflation expectations associated with tariffs are contributing to this trend.
Postal Service Merger Proposal
The Trump administration is also exploring the possibility of merging the United States Postal Service (USPS) with the Commerce Department. Trump expressed a desire for a more efficient postal system, referring to the proposed merger as "a form of a merger." However, the USPS board of governors is reportedly considering legal action to prevent this move.
Potential Revenue from Tariffs
The Trump administration has projected substantial revenue gains from tariffs, particularly from the 10% duties already imposed on Chinese goods. Economic Council Director Kevin Hassett estimates that new restrictions on China could generate between $500 billion and $1 trillion over the next decade.
Focus on Digital Service Taxes
Trump's latest executive order on tariffs opens a new front in trade talks. The order directs the study of whether tariffs can be levied in response to foreign taxes on U.S. tech companies. These taxes, known as digital service taxes, have been implemented in several European countries as a means to tax tech giants that operate within their jurisdictions.
Potential Reciprocity with the European Union
The Trump administration has indicated that ongoing trade talks with the European Union may lead to positive outcomes. Trump stated that the EU has recently adopted a more cooperative stance, expressing optimism that this could lead to reciprocity in trade practices.