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: U.S announces suspended tariffs on six countries in hope of resolving digital-tax dispute

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The Biden administration said on Wednesday it would slap 25% tariffs on imports worth more than $2 billion from six countries over their taxes on U.S. tech companies.

But it immediately suspended the duties for 180 days to allow time for multilateral negotiations on a new international tax framework to continue.

  • The office of the U.S. Trade Representative (USTR) said the tariffs on the U.K., Austria, India, Italy, Spain and Turkey, followed a year-long investigation that concluded that their digital taxes discriminated against U.S. technology companies like Alphabet’s
    GOOGL,
    -0.44%

    Google, Amazon
    AMZN,
    +0.48%

    and Facebook
    FB,
    +0.01%
    .

  • “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 outlook: The decision by the U.S. to suspend the tariff increases suggests its willingness to agree an international tax deal, which could be key to President Biden’s proposal to hike the domestic corporate tax rate to 28% from 21% to pay for his $2.3tn infrastructure plan. If a deal is not reached within six months, then U.K. goods such as clothing, cosmetics and video games, with a total value of $887 million will face the tariffs. 

Although potentially serious if realized, the threat of tariffs seems unlikely to materialize, Jefferies analysts wrote in a research note to clients on Thursday.

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