An Overlooked Trade War: Europe’s Digital Trade War Against American Innovators
By Sen. Saxby Chambliss and Sen. Kent Conrad | National Interest | May 7, 2025
A trade war that’s been overlooked, but has been quietly underway the past several years, is Europe’s digital trade war against American innovators – and it’s growing larger and more destructive daily. The European Union (EU) has imposed billions in fines, compliance costs, and sweeping new rules against America’s most innovative tech companies while barely touching Chinese or European firms. These “digital tariffs” aim to boost Europe’s tech sector at America’s expense but instead weaken both sides of the Atlantic, to China’s benefit.
To help the Western democracies win the race for the future, European policymakers should heed the calls of their voters, consumers, businesses, and statesmen to reduce regulations and apply the law in an evenhanded manner.
The Problem: EU Siphons Hundreds of Billions from U.S. Tech Companies
For many years, European policymakers have enacted sweeping regulatory regimes that deliberately focus on U.S. companies but not their Chinese or European counterparts. The Digital Markets Act, Digital Services Tax, General Data Protection Regulation, and AI Act target American firms via high, artificial thresholds that capture only the largest global companies, ambiguous language that gives regulators substantial discretion, and fines based on a percentage of global turnover rather than harm to European consumers. Through these laws, European regulators have fined U.S. firms over $320 billion, more than the EU’s annual budget of €186 billion, and raised these firms’ compliance costs to the point where U.S. companies now hesitate to introduce new products into European markets.
U.S. policymakers are taking note. Both the Trump Administration and numerous members of Congress have expressed “ongoing concerns with EU efforts to regulate the digital economy in ways that harm American companies and workers.” As authoritarian competitors rise, transatlantic alignment on innovation and economic policy is more critical than ever. Instead of fragmented rules, the U.S. and EU should work together to boost shared competitiveness and uphold common values.
The Impact: Damaged Consumers and Diminished Competitiveness
Europe’s policies are harming companies and consumers on both sides of the Atlantic. For Europeans, these policies limit the availability of goods and services to their consumers and reduce investment in their businesses. Both Apple and Meta, for instance, have delayed the release of new artificial intelligence (AI) products into Europe due to its regulatory morass. For open-source projects, including those originating among European companies, the AI Act’s arbitrary lines, sweeping scope, and limited exclusions are likely to reduce AI’s development and availability to Europe and Europeans.
For Americans, the fines represent a pure wealth transfer from U.S. workers and shareholders to European bureaucrats. Even worse, the rules create uncertainty for U.S. businesses, who cannot predict with confidence what types of conduct European regulators will deem problematic. As a result, U.S. firms have fewer incentives to launch advanced products in European markets and, accordingly, a reduced incentive to innovate and ability to gather market feedback to improve their products.