Lutnick Is Using Metals Tariffs as Leverage Over the EU
Commerce Secretary Howard Lutnick went to Brussels this week with a refreshingly direct message: if Europe wants relief from American steel and aluminum tariffs, it will have to ease up on its regulatory and tax assault on U.S. technology companies.
Notice the straightforwardness of this offer. There’s no need for elaborate moral framing or appeals to “shared values.” Just a simple transaction: we have something you want, you have something we want—let’s make a deal. This is what the real-world application of President Donald Trump’s governing philosophy looks like.
This is what trade policy is when Washington finally puts American economic interests first. This is how adults discuss deals among themselves.
The context is simple. Since the July trade agreement set a fifteen percent baseline tariff on most EU goods, European manufacturers have been hemorrhaging sales in the U.S. market. Steel and aluminum face a hefty 50 percent tariff—and that rate also applies to the metals components of goods containing European steel and aluminum. German Economy Minister Katherina Reiche admitted that “many machines that have been produced can’t be delivered to the U.S., and our companies are suffering from considerable declines in sales.” The pain is real, and it’s accelerating.
Europe wants tariff relief badly. Lutnick made clear they can have it so long as they reform what he correctly called a “regulatory chokehold” on American tech firms and resolve legacy cases such as the nearly €3 billion penalty facing Google. Importantly, Lutnick wasn’t offering relief from the fifteen percent baseline tariff. His offer was targeted: roll back the steel and aluminum tariffs—and the tariffs on products that contain them—if Europe reins in its digital protectionism.
Europe’s Digital Services Protectionism
The elegance of Lutnick’s move is that it treats regulatory policy the way it actually functions: as a tradable instrument, not a sacred artifact. European officials played their predictable role. A Commission spokesperson insisted the EU has a “sovereign right to legislate.” Trade chief Maroš Šefčovič solemnly claimed the rules are “not discriminatory” and “not aimed at American companies.”
Fine. Europe has every right to regulate however it likes inside its borders. And the United States has every right to maintain tariffs that make European manufacturers uncompetitive. The question is not about abstract rights but about relative priorities: What does Europe value more?
The numbers make the answer embarrassing. The Digital Services Taxes (DSTs) enacted by France, the UK, Italy, Spain, and Austria generate perhaps $3–4 billion a year in total. France and the UK each pull in around $1.1 billion. Italy collects roughly $530 million. These figures look large until you realize they amount to rounding errors in national budgets—DST revenues typically come in below 0.5 percent of tax receipts. France’s DST accounts for just 0.22 percent of all French tax revenue.
If revenue were the real goal, Europe would design these taxes very differently. Policymakers would tax digital commerce broadly, or all high-profit firms, or all companies above a certain size. Instead, the 2018 EU DST proposal deliberately carved out thresholds—€750 million global revenue and €50 million EU digital revenue—precisely to capture the U.S. giants and exclude smaller European competitors. The taxes apply to gross revenue, not profits, and only in sectors where American companies dominate: online advertising, digital marketplaces, and user data.
In other words, this is protectionism disguised as tax policy.
And it’s protectionism that hurts Europe itself. The DSTs were supposed to “punish” Big Tech, but the companies simply passed the costs on. Google added a two percent “DST fee” in the UK, five percent in Austria and Turkey, and three percent in France and Spain—specifically to cover DST costs. Amazon raised seller fees by two percent in the UK and implemented similar increases elsewhere. Apple hiked developer commissions. In practice, European advertisers, merchants, app developers, and consumers are the ones footing the bill.
So, Europe collects pocket change from its own businesses while forgoing what Lutnick estimates could be “hundreds of billions, possibly $1 trillion of investment,” along with “a point and a half” of GDP growth. Even if those projections are optimistic, the gap between what Europe is fighting for (0.2 percent of tax revenue) and what it is giving up is staggering.
Why cling to a policy so obviously self-defeating? Because the point is not revenue. It’s patronage. DST regimes serve as protectionist gifts to influential domestic technology companies, market shelters designed to slow down more competitive American firms. They sit alongside the Digital Services Act, the Digital Markets Act, and a long series of massive antitrust cases that almost exclusively ensnare American companies. Brussels can claim neutrality, but when nearly all the regulated firms are American, neutrality becomes performance art.
Lutnick’s Trade Jujitsu
This is why Lutnick’s linkage of steel tariffs and digital regulation is sophisticated statecraft. He’s not pretending the issues are philosophically connected. He’s applying the basic logic of negotiation: you care about your manufacturers, and we care about our tech companies. Let’s trade. When a trading partner uses targeted taxes to handicap your firms, you respond by putting their real economic interests on the table.
The truly brilliant part is that this strategy splits Europe’s own special interests. It forces Brussels to confront the fact that the DSTs were designed to shield Europe’s struggling tech sector—yet those same taxes now threaten the far more politically powerful manufacturing sector. Lutnick has exposed the tradeoff: Europe can keep its penalties on U.S. tech companies to protect a weak domestic tech industry, or it can reopen access to the U.S. market for its heavy-duty manufacturers. It cannot have both.
And note the broader context: DSTs were supposed to be temporary, pending an OECD global tax agreement. That deal has been postponed over and over, first to the end of 2023, then mid-2024, now indefinitely. Europe has shown no sign of removing DSTs absent a global deal. France has even floated doubling its DST rate from three to six percent if the OECD process collapses. Like most “temporary” taxes, these measures are becoming permanent precisely because they are politically useful.
Lutnick has forced Europe to confront the real tradeoff. Brussels can preserve its “sovereign right” to impose protectionist digital taxes and regulations. Or it can have the steel and aluminum deal. But it cannot have both.
Washington has finally made the choice clear. Now Europe has to decide whether protecting tiny, politically convenient revenue streams is worth sacrificing the health of its own industrial base. Lutnick is treating Europe’s barriers the way they deserve to be treated: as obstacles to be bargained away rather than abstract principles to be respected.
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