European Council President António Costa Defends EU Digital Tax Sovereignty Against Trump's Tariff Threats
In a defiant statement today, European Council President António Costa declared that the 27 EU member states will not back down on digital taxation despite President Trump's threats of 100% tariffs on European exports. Speaking at a press conference following the implementation of a new EU–US trade agreement, Costa emphasized that Europe will maintain full authority over its tax policies—signaling that a confrontation over how Silicon Valley firms are taxed in Europe is now unavoidable.
"We are fully committed to maintaining good relations with the United States, to give their companies predictability," Costa stated. "At the same time, the US and the EU are sovereign entities. The United States recently celebrated their independence, but so too are the 27 member states of the European Union sovereign."
The statement comes hours after the EU–US tariff agreement took effect, capping most duties on European exports at 15%. However, the accord deliberately excluded digital service taxes from any resolution—leaving this dispute unresolved and escalating tensions just as Washington's patience appears to be wearing thin.
Why This Matters for Italy and European Residents
Trump has warned of 100% duties on goods from any European nation enforcing digital service taxes—a move that would override the recent trade deal and cripple export-dependent economies like Italy's. Italy has maintained a 3% digital services tax since 2019 and, as of January 2025, expanded its scope by removing revenue thresholds, effectively widening the tax net just as the US threatened retaliation.
Italy shipped approximately €50 billion in goods to the United States in 2025. A sudden doubling of tariffs would devastate Italian manufacturers, vineyards, and luxury brands that depend on American consumers. Import prices on American goods could also rise sharply, affecting everyday items from electronics to certain food products.
The Background: Why Digital Taxes Exist
European policymakers argue that Big Tech exploits outdated tax frameworks to book profits in low-tax jurisdictions like Ireland or Luxembourg while extracting enormous value from European users. Countries including France, Italy, Spain, and Austria have imposed digital service taxes on tech giants like Google, Amazon, Apple, and Meta—levying 3% on gross revenues from online advertising, digital intermediation, and user data sales.
American officials counter that these taxes disproportionately target US firms and function as discriminatory trade barriers. Because they apply to revenues rather than profits, they can bite even when a company operates at a loss.
The OECD's Two-Pillar plan, agreed in principle in 2021, was meant to resolve this tension through global reform. However, implementation has stalled, with US negotiators reportedly signaling interest in walking away from Pillar One over disagreements on scope and allocation. This leaves national digital taxes as the default—and the tariff threat as Trump's leverage.
Immediate Impact on Italian Residents and Businesses
For residents in Italy, the standoff carries concrete consequences. Tech users and small firms already bear part of the digital tax burden indirectly. Platforms like Google and Facebook have passed costs to advertisers and sellers, who raise prices for consumers. A grocer promoting products via Facebook ads or a winery selling through an e-commerce marketplace faces higher platform fees—costs ultimately passed to shoppers.
If Trump follows through on tariff threats, employment in export-oriented sectors—textiles, machinery, agribusiness, and food production—could suffer significantly. Italy's manufacturing heartland, already managing post-pandemic supply chain disruptions, would face a severe new headwind.
What Comes Next
The European Council meets again in mid-July, with digital taxation expected to dominate discussions. Member states must decide whether to maintain their national levies, risk US retaliation, or seek a compromise.
However, Costa's tone suggests little appetite for concessions. By framing sovereignty as a non-negotiable principle and invoking American independence as a parallel, he signaled that Europe will not be pressured into abandoning tax measures it views as legitimate and necessary.
The European Commission has warned it will respond "swiftly and decisively" to any unilateral US measures—potentially through counter-tariffs, legal challenges at the World Trade Organization, or coordinated export restrictions targeting sectors where Europe holds leverage.
For now, residents and businesses in Italy face a period of uncertainty. A trade war over digital taxes would damage both economies—but the political calculus appears to favor confrontation.
