In mid-December, the CEOs of major U.S. tech companies gathered at President Donald Trump’s Florida residence. During the meeting, they pledged to donate $1 million each to his inauguration.
On Monday, Nov. 20, Trump officially began his second term in office. He was surrounded by the elite of Silicon Valley, who got front-row seats as he was sworn in as the 47th President of the U.S. Just hours later, tech giants began to enjoy the first benefits of their support for the new president: reduced taxes on their overseas operations.
Front-row seats. Among the front-row attendees at the inauguration were Trump’s closest family members and other key supporters.
Additionally, Amazon founder Jeff Bezos, Meta CEO Mark Zuckerberg, Tesla CEO Elon Musk, Apple CEO Tim Cook, Microsoft CEO Satya Nadella, and OpenAI CEO Sam Altman were seated next to Trump’s children and in front of political allies such as Robert F. Kennedy Jr. and Secretary of State Marco Rubio. TikTok CEO Shou Zi Chew was also there, just hours before Trump announced a 75-day delay on the platform’s ban in the U.S.
Tech goes first. After his inauguration, Trump quickly began implementing new policies. He started with an executive order that temporarily halted any international tax agreements made by the previous Biden administration.
One of Trump’s recent executive orders says, “America will no longer be beholden to foreign organizations for our national tax policy, which punishes American businesses.” Through this measure, the government aims to reassess international tax policies to prevent other countries from imposing additional taxes on large U.S. corporations, with the potential for retaliatory tariffs.
Eyes on Europe. One of the tax agreements mentioned in Trump’s executive order is the Organization for Economic Co-operation and Development’s reform of international taxation that the U.S. signed in 2021. This agreement indicated that if a company based in one of the signatory countries earned more than $750 million in profit, and that country’s tax rate wasn’t above 15%, the signatory countries could impose additional taxes so that the profits contributed to the nation where they were generated.
Trump’s executive order also calls for an investigation into “any foreign countries [that] are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies.”
Trump’s economic war. Throughout his presidential campaign, Trump threatened countries such as Denmark, Mexico, China, and Canada with higher tariffs. However, these threats only represented a portion of his overall strategy. Experts expected that the OECD agreement would result in a tax increase of about $192 billion for major tech companies in the U.S. With Trump’s actions, the agreement has now been nullified.
According to trade policy expert Allie Renison, “The economic warfare net is ever-widening well beyond just tariffs, and as governments start to consider their response, concerns will now pivot to what else might be caught up in retaliatory crosshairs–and the inevitable costs that go with it.”
The OECD has taken a cautious stance. Trump’s executive order directed the Treasury to prepare “protective measures” against any country that implements tax rules that the new administration believes are “extraterritorial” or “disproportionately affect” U.S. companies. This poses a direct threat to any country that was already adhering to the OECD agreement by applying additional taxes on Big Tech.
According to Alex Cobham, chief executive of the British advocacy group Tax Justice Network, “Since 2013, the focus of international reforms has been to curb the ability of multinational companies to shift their taxable profits away from the places that they are actually doing business and making money. The scale of profit shifting has grown steadily due to the OECD’s comprehensive failure–but at least they can say they tried. The Trump administration is now threatening anyone who seeks to claim their fair taxing rights over US multinationals, including the OECD itself.”
Image | NARA
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