As expected, the United States has unleashed a tariff war against almost the entire world. While it is to be expected that American consumers will be the first to pay the bill, and will no doubt pay dearly, the more or less long-term effect will be catastrophic for all economies.
In this context, where the European economies are being hit in the sectors that make them strong, it is legitimate to consider a symmetrical measure that would affect the digital sector and digital services, which are one of the strengths of the American economy.
But there is no guarantee that it is such a good idea.
In short :
- The United States has imposed a 20% tariff on European exports, citing a trade deficit that falls sharply if services are included.
- Europe remains largely dependent on American digital services, with few credible alternatives in B2C and a still limited presence in B2B.
- Taxing business services could support European players, but it involves high costs and a complex transition.
- This strategy would also risk weakening employment linked to the European locations of American giants, particularly in Ireland.
- The WTO moratorium, which prohibits any customs taxation on digital flows, makes this option legally uncertain and would push towards an increase in national VAT.
The American tariff offensive
On April 3, 2025, Donald Trump thus triggered a new phase of the trade war by imposing tariffs of 20% on European Union exports. These measures, justified by a US trade deficit of 198.2 billion euros in 2024 compared to 156.6 billion in 202 ([FR]The EU has a record trade surplus in goods with the United States) and are explicitly aimed at protecting American industries.
However, this deficit should be put into perspective.
When we talk about foreign trade, it is customary to take into account only goods, not services.
If we include services in the balance, an area in which the United States has a surplus of 114 billion dollars, this deficit is much more moderate ([FR] Trade between the EU and the United States: the impact of tariffs on Europe): 50 billion dollars in 2023.
The European Commission is planning countermeasures on steel and aluminum as early as April 13, while exploring targeted responses in digital services, which would a priori only be logical: if the United States taxes goods where they have a deficit, let’s tax services where we have a deficit.
Europe absent from digital services
When it comes to digital services, it is important to understand how Europe is almost nowhere.
In B2C, to take just a few examples, WhatsApp, Google, Netflix and others hold more than 80% of the market ([FR]Europe must free itself from its digital dependence). On the other side, on the European side, the likes of ProtonMail and Qwant are struggling to exceed marginal adoption (less than 5%).
It is no better in B2B, where Microsoft, Oracle and Salesforce account for 70% of critical cloud infrastructures and, moreover, “hold” their customers with mostly multi-year contracts. Opposite them, OVH and Scaleway are said to account for less than 10%.
Europe dependent on US software
When it comes to services, we cannot ignore the world of software either, where the picture is hardly any brighter.
Microsoft and Google are extremely dominant in the world of office automation, Adobe among creatives and Salesforce is the leader in customer relations.
It is not for lack of European alternatives such as OnlyOffice in office automation, Talkspirit and Jamespot in collaboration, SAP or the open source Odoo in the field of ERP, but the conclusion is brutal: if we remove SAP and Dassault Systèmes, no European publisher can look its competitors in the eye from a commercial (always) and technological (most often) point of view.
I will be told that they often have nothing to envy them in terms of products, and this is often true, but the figures are there and they do not lie.
When it comes to operating systems, the picture is no brighter. On the computer market, Windows and MacOS take the lion’s share, as do Android and iOS for mobile devices.
We can dream of seeing EU OS installed one day on all computers on the continent (EU OS: A Bold Step Toward Digital Sovereignty for Europe) but I really find it hard to believe.
Customs duties to boost European sovereignty
When we talk about taxation of digital services, we are talking today about a vague perimeter on which the European Union has not made any decisions. Are we talking about B2C? B2B? Are we going to extend it to software?
But it is not unreasonable to think that a tax on US digital services would greatly benefit European players, who would benefit from a shift in customers towards European solutions. This would boost the sovereign IT sector, which is so desired by some but is struggling to take off, not so much in terms of supply as of market interest.
The fact that everyone pays 20% more for their Netflix, LinkedIn, iCloud subscriptions, as well as businesses for their Microsoft, Oracle and Salesforce licenses, should convince a few.
But is it realistic?
Consumers with no alternative to US services
The idea is of course to bring about a shift from American solutions to European solutions. This will work on two conditions: the European solution will have to be more affordable (and logically it will be) but also offer an equivalent service.
Let’s be honest: taxing consumer services would be pointless, even counterproductive.
Not only would European consumers pay more, but in the absence of a credible alternative, they would have nowhere to shift their spending.
Let’s make a list of the most popular paid services: not only do they have no equivalent in Europe, but believing that need will create supply is totally illusory.
I would add, even if it is not the subject, that Europe no longer has any computer or mobile phone manufacturers worthy of the name and that whatever the origin of the hardware, it will have an American OS that is taxable in most cases.
In other words, if it were to show any clear thinking, the European Union would have to exclude the field of services to consumers from any customs duties, which would only weigh on household finances without ultimately benefitting the local economy.
All that remains, therefore, is the field of services to enterprises.
Taxing business services: the promise of an El Dorado
Taxing US digital services aimed at businesses therefore seems a more realistic option.
Indeed, while in B2C the consumer is faced with a desert of alternatives, this is not the case in B2B.
In office automation/collaboration, European alternatives to Microsoft and Google are legion, and if they lack traction today, it is more due to habit and the syndrome of “we’ve never fired anyone for choosing Microsoft” than anything else. And don’t talk to me about functional richness: the average user only uses 30% of the potential of Microsoft 365 which, when you think about it, should make businesses realize that they are throwing money out the window (How Enterprises Are Faring in the Battle Between SaaS Application Enthusiasm and Corresponding License Waste).
The same goes for the cloud: the players are there with OVH, Scaleway, Dassault Système…They are just waiting to change scale.
In business applications, SAP and Dassault Systèmes hide a forest of players just waiting to grow.
What are European players lacking? Most often, scale, the attention of decision-makers who have never had a reason to pay attention to them, a little courage on the part of the latter and a helping hand that could come from customs duties.
But an El Dorado that is a minefield
Taxing services to businesses is a potential gold mine in which you might well find only lead.
Let’s start with two obvious arguments against this idea.
The first is that despite the positive picture I painted above, not all US services can be replaced by European services: Google and Facebook, to name but two, are two advertising agencies that are vital for businesses, even if an internet without advertising would be a dream. A utopian dream, but a dream nonetheless.
The second is that for a multinational business, this would mean having to maintain a dual information systemaccording to its locations. Unmanageable, complex and, above all, prohibitively expensive.
Speaking of costs, let’s talk about them.
Businesses, especially the largest ones, are bound to their digital service providers by contracts that are usually multi-year. Even if they decided to abandon Microsoft, Google or Oracle in favor of a European solution, they would have to pay taxes for years before they could switch. This would be an unbearable price to pay.
And in any case, the switch could not be made in a day. It takes a lot of preparation and planning, it takes a long time, it requires change management and, in the end, it is expensive.
Customs duties on services to businesses would place a significant financial burden on them, with no hope of them emerging from it for many years, even if they chose to switch to a sovereign solution, and this at the cost of a migration effort that would add to the taxes paid.
Employment and the Irish case: the EU’s fiscal thorn in the side
Behind taxes often lie jobs.
Ireland offers favorable tax conditions that have attracted businesses such as Apple, Google and Microsoft, which generate 45% of their European revenues there.
In concrete terms, wherever you are in Europe, if you buy a service from one of the many companies concerned, you will be invoiced in Ireland, where they have set up shared service centers to serve their locations in different countries.
We are talking about 62,000 jobs in Ireland and 80,000 in the EU that are linked to American tech giants.
An increase in customs duties that would damage the economy of US businesses in Europe will necessarily have an impact on these jobs.
But by the way, can tariffs be imposed on services?
All the scenarios mentioned above involve taxation of digital services, and I stress the notion of service.
But while researching the Irish case, I learned one thing: local players are considering exempting themselves from a tariff increase by switching everything to a SaaS model! Whatever anyone says, many of these publishers still operate with a perpetual license model that is equated with a commodity by the courts ([FR] the “sale of goods” includes the supply of software).
But what about SaaS then?
A 1998 World Trade Organization moratorium prohibits member states from imposing customs duties on electronic transmissions, including cross-border digital flows, including software, data, media and online services (SaaS, cloud) even if the latter point is open to interpretation ([FR] The WTO has renewed the “moratorium on electronic transmissions,” but for how long?).
In the event that SaaS is excluded from customs duties, as are all other digital services (Netflix, etc.), the European response can only be an increase in VAT on imported products or the creation of a specific tax. And since European VAT does not exist, it will be up to each country to act on its own.
Nothing is impossible, but it is more complicated, although it allows each country to act individually in the absence of collective will and agreement.
Bottom line
The trade war initiated by Donald Trump reveals European weaknesses in the tech world, but also a potential that could be better exploited if businesses made use of European preference.
On the other hand, as far as the general public is concerned, the die seems to be cast.
However, we realize that if customs duties on digital services were to be introduced and remain in place, European businesses would pay a high price without the local ecosystem benefiting for many years to come.
But again, digital services would have to be subject to customs duties, which would appear to contravene a WTO moratorium.
But all this may only be temporary: as with state reform (Do enterprise innovation methods work in the public sector? Or: can governments be reformed?): if inflation and employment do not improve within two years, there is a risk that Congress will backtrack on many things.
