A truce that quietly expired
In October 2021, the United States and five governments — the UK, France, Italy, Spain, and Austria — struck a bargain: those countries would keep collecting their digital services taxes (DSTs) a while longer, and Washington would hold off on retaliatory tariffs, all on the promise that the OECD's Pillar One framework would soon replace unilateral DSTs with a single global reallocation of taxing rights (USTR, June 2021). Pillar One was supposed to reallocate roughly $200 billion in multinational profit to the countries where users actually are, making DSTs unnecessary. Five years on, Pillar One is still unsigned, the 2021 standstill has lapsed, and — according to a new report from the Computer & Communications Industry Association (CCIA) — the five original signatory countries have collected over $13 billion from US companies since 2020, with $3.6 billion in 2025 alone, up 20% year-over-year (CCIA, July 2026). CCIA's Jonathan McHale argues the administration "has the tools it needs under Section 301, and today's findings show why using them is overdue."
The case DST supporters actually make
Before dismissing this as pure lobbying, it's worth stating the strongest version of the counter-argument, because it isn't frivolous. Large digital platforms generate substantial advertising and marketplace revenue from users in the UK, France, Italy, Spain, and elsewhere without a taxable physical presence there under century-old permanent-establishment rules. Traditional corporate tax law was built for factories and branch offices, not for a search engine or social network monetizing attention it never has to physically collect. Governments facing constituents who see US tech firms report low effective local tax rates have a legitimate revenue and fairness grievance, and DSTs — typically 2–5% on in-scope gross revenue — were designed as an interim fix while a multilateral solution was negotiated (Tax Foundation Europe, 2026). That multilateral solution has now missed its 2023 and 2024 targets, with the UK reportedly planning around a 2027 implementation at the earliest — so it's fair to ask why the interim measure should be treated as illegitimate five years in.
Where the proportionality case breaks down
The trouble is that DSTs were never actually neutral. Revenue thresholds in France, Italy, Spain, Austria, and the UK are calibrated — global revenue floors north of €750 million and local-market minimums — to exempt nearly every domestic competitor while capturing a small number of US platforms almost by design; that's precisely why USTR's original Section 301 investigations found them discriminatory rather than merely novel tax policy. The cost also doesn't stay with the platforms. Digital advertising and marketplace fees are largely pass-through costs, so DSTs function as a tax on the small businesses and advertisers who buy those services locally, layered on top of whatever corporate tax the platforms already pay. And unlike a negotiated treaty, DSTs are unilateral and stackable: CCIA notes it is now also tracking a DST in Türkiye and watching proposals in Korea, Belgium, Poland, and Australia, while the Tax Foundation counts roughly ten European countries with active DSTs today. A patchwork of ten-plus distinct national gross-revenue taxes is a worse outcome for cross-border digital trade than either the old rules or the Pillar One framework it was meant to bridge to.
Section 301 is a blunt instrument for a real problem
USTR itself has signaled it isn't done with this file. Trade Representative Jamieson Greer said in April 2026 that the office has "certain Section 301 potential actions in draft" on digital-sector trade barriers and is prepared to use them absent a negotiated fix — a notable shift from the 2021 posture of suspending tariffs to give the OECD process room. That said, the 2021 experience is also a caution: retaliatory tariffs on unrelated goods (the earlier round targeted items from French handbags to Italian ceramics) hit American importers and consumers, not the foreign treasuries collecting DST revenue, while doing nothing to fix the underlying tax-jurisdiction question. If Section 301 tariffs return in 2026, they should be paired with — not substituted for — a renewed US push to actually close out Pillar One or a narrower successor deal, since another round of tariff-and-countertariff will simply add a second layer of cost to the same cross-border commerce DSTs already tax once.
The proportionate path
The evidence-based read here isn't that DSTs are baseless or that Section 301 is illegitimate — it's that both sides have let a temporary fix calcify into permanent policy. The US should keep 301 as leverage, exactly as CCIA argues, but use it to force a genuine multilateral deadline rather than to relitigate 2021 unilaterally. Absent that, $3.6 billion a year and rising is a tax American firms will keep paying while the framework meant to replace it drifts toward 2027 and beyond.