Note: This analysis is part of our series on geopolitical tensions in digital policy. The series starts by dissecting a recent US memorandum that scrutinises different types of foreign digital policy. Topical pieces, including this, then distill the global state of affairs and explain the cause of geopolitical tensions in one type of digital policy.

The US memorandum on “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties” scrutinises various foreign digital policies. Below, we dissect the memorandum and the types of digital policies it mentions, to then discuss how governments can prepare for the next steps of geopolitical tensions in digital policy.

The memorandum contains three core sections that provide progressive levels of detail: Purpose, Policy, and Agency Responsibility.

The purpose section claims that “foreign governments have increasingly exerted extraterritorial authority over American companies, particularly in the technology sector.” It then lists different types of digital policies that “violate American sovereignty and offshore American jobs, limit American companies' global competitiveness, and increase American operational costs.” 

The memorandum then states that the US administration will not allow American companies and workers to be compromised by one-sided, anti-competitive policies of foreign governments. Specifically, the memorandum mentions:

• digital services taxes; 

• regulations governing digital services that are more burdensome and restrictive on US companies than domestic companies; 

• limits to cross-border data flows; 

• requirements for American streaming services to fund local productions; and 

• network usage and Internet termination fees.

To this end, the policy section establishes that the US administration will impose tariffs and pursue other responsive action necessary to mitigate harm and repair imbalances. This applies when foreign governments impose a “fine, penalty, tax, or other burden that is discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies” to the foreign government or its local companies.

In particular, the administration will consider the following scope when taking responsive action:

• taxes imposed on US companies by foreign governments, including those that may discriminate against US companies;

• regulations imposed on US companies that could inhibit the growth or intended operation of US companies;

• any act, policy, or practice of a foreign government that could require a US company to jeopardize its intellectual property; and

• any other act, policy, or practice of a foreign government that serves to undermine the global competitiveness of US companies.

The third section demands concrete action from different US government agencies. 

The US Trade Representative (USTR) will address digital services taxes:

• The USTR will determine whether to renew investigations of the digital services taxes of France, Austria, Italy, Spain, Turkey, and the United Kingdom (UK). These investigations were initiated by the first Trump administration under section 301 of the Trade Act. 

• The USTR will determine whether to investigate the digital services taxes in other countries, under 302(b) of the Trade Act. 

• The USTR will determine whether to pursue a panel under the US-Mexico-Canada Agreement on Canada's digital services tax, and whether to investigate said tax under section 302(b) of the Trade Act. 

Several authorities will analyse foreign trade and regulatory practices deemed to be discriminatory. Specifically, the Treasury Secretary, the Commerce Secretary, and the USTR will jointly identify practices that “discriminate against, disproportionately affect, or otherwise undermine the global competitiveness or intended operation” of US companies. The scope includes but is not limited to the practices described in the “policy” section. The authorities will also recommend actions to counter such practices. The results will be provided by the USTR, in a report requested by the America First Trade Policy Memorandum, due in April 2025.

The same authorities will analyse rules governing online content in the European Union (EU) and the UK. In particular, they will investigate whether any act, policy, or practice has the effect of “requiring or incentivizing the use or development of US companies' products or services in ways that undermine freedom of speech and political engagement or otherwise moderate content.” The results will be presented in the abovementioned USTR report and will recommend appropriate actions to counter such practices. 

The Secretary of the Treasury, in consultation with the other authorities, will analyse other tax regimes. Specifically, it will determine whether any foreign country 

• subjects US citizens or companies to discriminatory or extraterritorial taxes (in the digital economy or beyond); or

• has any tax measure that otherwise undermines the global competitiveness of US companies, is inconsistent with any tax treaty of the US, or is otherwise actionable under tax-related legal authority. 

The results, including options for protective measures, will be included in a report requested in the Memorandum on The Organization for Economic Co-Operation and Development Global Tax Deal.

The USTR will identify tools for the US to secure a permanent moratorium on customs duties on electronic transmissions among trading partners. The USTR will provide results in the abovementioned USTR report scheduled for April 2025.

Finally, the USTR will establish a reporting process regarding foreign tax or regulatory practices that disproportionately harm US companies, in consultation with other authorities.

The memorandum “floods the zone” by targeting a broad scope of foreign digital policies. It demands concrete action regarding foreign tax regimes, online content rules, and discriminatory trade and regulatory practices. Other areas that are mentioned, without requesting specific action, include rules on data flows, local content promotion, intellectual property, and telecommunications. Notably, the memorandum covers both legal requirements and enforcement action. 

The US administration will move fast on this broad target. The first reports by US authorities are expected in April 2025. Industry associations have already started listing foreign rules they deem “unfair” or “protectionist.” Geopolitical tensions in digital policy are here to stay.

Foreign governments are accordingly preparing to respond. Strategies range from slowing down enforcement, to waiting and seeing how the US follows through, to doubling down on regulation and enforcement. This effort is, however, complicated by the broad scope of digital policies that contribute to geopolitical tensions. Each type of digital policy pursues a different objective, through different policy instruments, under the oversight of different authorities. Who can connect the dots?

Our series serves as a guide to geopolitical tensions in digital policy, building on our database of over 9000 global digital policy developments. For each type of digital policy, we explain the current global state of affairs and outline how it contributes to geopolitical tensions. 

Explore our pieces on: 

• Taxation of the digital economy

• Online content regulation

• Restrictions on cross-border data flows

• Local content promotion

• Enforcement of digital policy

• Threshold-based obligations in digital policy