Trade

USTR Suspends Trump-era Tariffs In Response to Digital Taxes

SK Ashby
Written by SK Ashby

Technically or legally speaking, the Biden administration has announced that retaliatory tariffs originally proposed by the Trump regime in response to taxes on digital services will go forward, but the Trump-era tariffs will not actually be imposed.

The U.S. Trade Representative (USTR) has suspended the tariffs for the time being while a more permanent deal is reached in what could still result in new taxes.

“The United States is focused on finding a multilateral solution to a range of key issues related to international taxation, including our concerns with digital services taxes,” USTR representative Katherine Tai said in a statement, adding that the U.S. seeks to resolve the issue through the Organization for Economic Cooperation and Development and G20 processes.

The news comes as finance leaders from the Group of Seven (G7) countries are due to meet in London on June 4 and 5 to agree on a global corporate minimum tax, which the U.S. has suggested should be at least 15%.

The USTR's announcement that tariffs would be imposed (but suspended) was based on a year-long investigation initiated by Trump's trade representative Robert Lighthizer. That investigation reached a conclusion that the Trump White House wanted and Biden's trade representative cannot simply erase it, but they can prevent tariffs from being hitting the books by suspending them.

The Biden administration also suspended Trump's tariffs imposed in response to the 16-year-old dispute over illegal subsidies for European aerospace giant Airbus.

The Biden White House is in a legally precarious position of straddling the line between following processes dictated by federal trade law and using their discretionary power to avoid imposing tariffs sought by the previous administration.

The Biden administration has not dialed back Trump's trade war as quickly as I would like to see, but I understand they're trying to balance legal and economic factors alongside pressure from labor unions and industry trade groups. It's a very fine needle to thread and I wouldn't want the responsibility myself.