US demands EU rewrite digital rules in exchange for metals tariff relief

US and European officials sat down in Brussels this week to take stock of the trade framework agreed in July, a deal that was supposed to lower the temperature on transatlantic commerce. Instead, the meeting laid bare how far apart the two sides remain on the issues that matter most to their respective industries. Washington is still applying a 50% duty on European steel and aluminium, a rate it has not only kept but extended to more products since the summer. The EU, for its part, is asking for agricultural carve-outs, wine, cheese, pasta, similar to the exemptions the Trump administration recently granted for tropical fruit and coffee.

Metals tariffs become leverage for digital demands

The new element in this round of talks is the explicit linkage the United States has drawn between metals relief and digital policy. Howard Lutnick, the US Secretary of Commerce, put it bluntly in a Bloomberg Television interview: the EU must "reconsider their digital regulations to be more inviting to our big companies" if it wants steel and aluminium included in any revised package. Jamieson Greer, the US Trade Representative, echoed the position, telling reporters that Washington expects Europe to follow through on promises to lower tariffs on American goods before granting exemptions, and that digital rules are part of that calculation.

The demand is not new in substance. Successive US administrations have argued that digital services taxes (DSTs) adopted by several European countries, typically levies on revenue from streaming or digital advertising above a certain threshold, disproportionately hit American firms. The Digital Markets Act (DMA), which entered into force in 2024, has added a second layer of friction. The legislation designates certain large platforms as "gatekeepers" and imposes obligations such as interoperability requirements and restrictions on self-preferencing. Apple, Google, Meta, Amazon, Microsoft and ByteDance have all been designated. US companies have lobbied hard against both the DSTs and the DMA, viewing them as extraterritorial regulation targeting Silicon Valley.

Brussels holds the line on regulatory sovereignty

Maroš Šefčovič, the European Commissioner for Trade and Economic Security, was unmoved. "This is not discriminatory. It is not aimed at American companies," he said after Monday's session. The Commission's position, consistent since the DMA was proposed in 2020, is that the rules apply to any platform meeting the quantitative thresholds, €7.5 billion in annual European turnover or €75 billion market capitalisation, regardless of nationality. The fact that the current gatekeepers are predominantly American reflects market structure, not legislative intent, Brussels argues. Šefčovič reiterated that the EU's digital acquis is not a bargaining chip in trade negotiations.

That stance has domestic political backing. The DMA was adopted by large majorities in both the European Parliament and the Council. Reopening it would require a new legislative process, something no major political group in the Parliament has appetite for. The DSTs, meanwhile, are national measures in France, Italy, Spain and elsewhere, introduced partly as a stopgap while the OECD's Pillar One negotiations on taxing digital giants stalled. The EU has promised to repeal them once a multilateral solution is in place, but that process is now years behind schedule.

A framework that left the hard problems unsolved

The July agreement was always a holding pattern. It set a 15% baseline tariff on most European industrial goods, well below the 20% or more the White House had threatened, in return for vague European commitments to increase investment in the United States and to adjust agricultural quotas. Metals were parked to one side. The EU had hoped the 25% steel and 10% aluminium tariffs imposed under Section 232 in 2018 would be lifted as part of the package. They were not. Instead, the US has since expanded the list of derivative products subject to the 50% rate, a move European producers say undermines the spirit of the July understanding.

European steelmakers argue the tariffs have already reshaped trade flows. EU steel exports to the US fell by roughly 30% in the first year after the Section 232 measures took effect, according to Eurofer, the European steel association. Aluminium producers tell a similar story. The expanded product coverage hits downstream manufacturers, makers of tubes, wire, foil, who had previously escaped the duties. For the Commission, the metals issue is a test of whether the US treats the EU as a partner or a strategic rival. The Biden administration negotiated a tariff-rate quota system in 2021; the Trump administration has let that arrangement lapse without replacing it.

Agricultural carve-outs: the EU's counter-ask

While Washington presses on digital, Brussels is pushing for agricultural exemptions. The EU wants wine, cheese, pasta and other high-value food products removed from the 15% baseline. The precedent is the recent US decision to exclude tropical fruit and coffee from tariff increases, a move driven by the fact that the United States does not produce those commodities domestesticly and importers faced immediate cost pressures. European officials argue the same logic applies to Parmigiano Reggiano, Bordeaux wine or Barilla pasta: American consumers buy them because there is no domestic substitute, and the tariff is a pure tax on US households.

The US has not rejected the request outright, but Greer's insistence that Europe move first on tariff reductions suggests a sequencing dispute. The EU's average applied tariff on US goods is already low, around 3% on industrial products, but higher on agriculture, where the EU maintains tariff-rate quotas and specific duties to protect its farming sector. Any concession there would be politically sensitive in member states, particularly France and Italy, where agricultural lobbies are powerful.

Tech industry expectations meet political reality

When Donald Trump won a second term in November 2024, US tech executives were openly hopeful. The Biden administration had largely left DST and DMA disputes to the companies themselves, intervening only occasionally through the USTR's Section 301 investigations. A Trump White House, the thinking went, would treat the digital rules as a trade irritant to be resolved at the highest level. Lutnick's comments confirm that expectation is being acted upon. What is less clear is whether the administration has a coherent endgame. "Reconsider your digital regulations" is a demand, not a proposal. The DMA is a regulation, not a directive; it applies directly in all 27 member states. Changing it requires a Commission proposal, Parliament and Council agreement, a process that takes 18 to 24 months at best.

Moreover, the DMA is already being enforced. The Commission opened non-compliance investigations into Apple, Meta and Alphabet in March 2025. Fines of up to 10% of global turnover, and 20% for repeated infringements, are on the table. For the EU to "reconsider" the rules while enforcement proceedings are live would undermine the credibility of the entire competition framework. That is a point Šefčovič and his predecessor, Margrethe Vestager, have made repeatedly: the DMA is not a trade instrument, it is a competition tool designed to address market failures the EU identified after years of case-by-case enforcement.

The OECD tax process: a parallel track going nowhere

The digital services taxes were always meant to be temporary. The OECD's two-pillar solution, Pillar One reallocating taxing rights on the largest multinationals, Pillar Two introducing a 15% global minimum tax, was supposed to render them obsolete. Pillar Two is moving forward; the EU transposed it into a directive in 2022 and member states are implementing it. Pillar One, which requires a multilateral convention to modify thousands of bilateral tax treaties, has stalled. The US Congress has not ratified the treaty, and the Trump administration has signalled scepticism about the whole project. Without Pillar One, European finance ministers say they cannot politically justify repealing their DSTs. The Commission has proposed an EU-level digital levy as a fallback, but that too is stuck in the Council.

This deadlock gives the US leverage. As long as DSTs exist, the USTR can threaten Section 301 retaliation, tariffs on European goods calibrated to the estimated revenue loss of US tech firms. The Biden administration suspended those tariffs while the OECD talks continued. The Trump administration has not yet reinstated them, but the threat is implicit in Lutnick's linkage of digital rules to metals relief.

What the July deal actually changed, and what it didn't

It is worth recalling what the July framework achieved. The 15% baseline tariff on EU industrial goods provides certainty for exporters who faced the prospect of 20% or higher. The EU committed to increasing energy purchases from the US, LNG in particular, and to working on supply chain resilience for critical minerals. A joint working group on non-market practices, aimed largely at Chinese overcapacity in steel and green tech, was established. These are not trivial outcomes. But the framework was explicitly provisional, a "phase one" that left the hardest issues, metals, agriculture, digital, procurement, for later. That later has now arrived.

The EU's negotiating hand is weaker than it appears. The 15% tariff is a presidential proclamation, not a statute; it can be revoked unilaterally. The US does not need Congressional approval to raise duties again under Section 232 or Section 301. The EU, by contrast, requires unanimity in the Council for any tariff concessions on agriculture, and the Parliament must consent to any deep regulatory changes. That asymmetry is not lost on the US negotiating team.