The Trade Deal That Settled the Wrong War

On June 25, the European Union did two things. It formally approved a trade deal with Washington, capping most export tariffs at 15% and averting the 50% levies Donald Trump had threatened for July 4. And on the same day, the European Commission designated Amazon Web Services and Microsoft Azure as "gatekeepers" under the Digital Markets Act, expanding the bloc's tech regulation to American cloud infrastructure for the first time. EU tech chief Henna Virkkunen called the move essential for what she termed Europe's tech sovereignty. ^[1][2]

Cloud services have become a cornerstone of Europe's economy - and a prerequisite for AI - with over half of EU businesses now relying on them, combined with record investment in public cloud infrastructure. — Henna Virkkunen

The image is the argument: a trade deal signed with one hand, a regulatory expansion with the other. The deal was supposed to draw down transatlantic tensions. It settled goods. The conflict was already somewhere else. The somewhere else is tech regulation, and the two sides have settled on framings of it that no tariff negotiation can bridge. For the Trump administration, every European digital rule — whether a tax, a competition fine, or a content-moderation requirement — is trade discrimination by another name. For the European Commission, those same rules are sovereign legislative authority it will not bargain away. The June deal could not resolve this because it was never designed to. It addressed the last trade war. This one runs on a different engine. Trump's framing has been consistent and explicit. In April, threatening the United Kingdom over its digital services tax, he declared that digital taxes, digital services legislation, and digital markets regulations were all designed to harm American technology. ^[3]

If they don't drop the tax, we'll probably put a big tariff on the UK. — Donald Trump

The day after the EU approved its trade deal in June, he applied the same logic to the bloc, threatening 100% tariffs on any country with a digital services tax and declaring the tariff would supersede trade deals with the country, "whether implemented, signed, or not." ^[4]

Please let this statement serve to represent that any Country that imposes such a Tax will immediately be met with a 100 percent TARIFF on any and all Goods sent to the United States of America. — Donald Trump

The administration has not stopped at tariffs. It imposed visa bans on EU tech regulators in response to earlier fines against Apple, Meta, and X — personal sanctions against the officials enforcing the rules. ^[5] When the Commission fined Google €890 million under the DMA on July 23, Trump called it robbing American companies and said the EU would pay a very big price. USTR Jamieson Greer warned the fines posed a real risk to transatlantic stability. ^[6]

The European Union will pay a very big price for this illegal and highly unethical conduct, which I have consistently warned them about. — Donald Trump

Please let this TRUTH serve to represent that we will immediately initiate a 301 Investigation in the practice of 'ROBBING' American Companies and, in turn, the American Taxpayer — Donald Trump

The next day, Trump launched a formal Section 301 trade investigation into the EU — the legal mechanism the administration has adopted across its trade policy after the Supreme Court stripped the president of authority to unilaterally impose tariffs under emergency powers in February. ^[6][4] The probe is an investigation, not yet a tariff. But the causal chain was direct: a DMA fine on Wednesday, a trade probe on Thursday. The European Commission's framing is the mirror image, and it is equally settled. A Commission spokesperson put it plainly. ^[7]

It's not for a third country to decide how we legislate. — Thomas Regnier

The EU treats its regulatory authority as non-negotiable sovereign territory. And rather than pausing enforcement under the threat of US retaliation, it is expanding the surface area exposed to it. On the same day Trump launched the Section 301 probe — July 24 — the Commission charged TikTok with violating the Digital Services Act's minor-privacy rules. ^[8] The EU is not slowing down. It is accelerating on a parallel track. Antitrust chief Teresa Ribera has made the direction explicit. ^[9]

The DMA was designed to be future-proof and adapt to emerging challenges, for example in AI and cloud — Teresa Ribera

That expansion is already underway. The June 25 gatekeeper designations for AWS and Azure brought cloud infrastructure under the DMA's enforcement umbrella. The Commission is simultaneously proposing a new union-wide digital levy on tech giants to fund its 2028-2034 budget — precisely the kind of measure Trump has threatened 100% tariffs over. ^[5] And in May, the EU unveiled a Technological Sovereignty Package that restricts foreign cloud providers from sensitive public-sector contracts and pushes European institutions toward homegrown alternatives: EU bodies have already begun replacing Microsoft Office with open-source software, and the Gaia-X cloud project is being developed to compete with AWS and Azure directly. ^[10][11] This is escalation beyond regulation. The EU is not merely writing rules for American tech firms. It is building infrastructure to displace them. The structural problem is now visible from both sides. The EU is growing the regulatory surface area — more firms, more sectors, more enforcement actions — each of which doubles as a potential trigger for US retaliation. The US is growing the retaliation toolkit — Section 301 probes, tariff threats, visa bans on individual regulators — each calibrated to treat regulation as a trade offense. And the June trade deal, for all its safeguards and sunset clauses, was a goods-tariff agreement. It cannot bridge two positions where one side sees sovereign legislation and the other sees economic warfare. The next trigger is not hypothetical. Ribera's future-proof DMA is expanding into AI and cloud right now. The regulatory frontier is moving outward, which means the conditions for the next Section 301 probe are being created as the last one begins. The deal settled the last war. The next one is already being built.