If Fidel Castro were alive, he would light a cigar and celebrate that the European Union is poised to confiscate far more funds from the United States in one year than Castro could in a lifetime. Furthermore, the EU has gotten the U.S. government to aid and abet it.
Through its Digital Markets Act (DMA) and Digital Services Act (DSA), the EU has imposed onerous requirements on large technology companies. Most of the designated companies are from the United States, a few are from China, and the principal beneficiaries are these companies’ European technology competitors, who are far less successful and innovative than those from the U.S. and China.
Five of the six initial companies named in the DMA are based in the United States. For the DSA, 15 of the 19 companies are U.S.-based.
Under the DMA, the EU has negotiated and secured commitments for business changes from Alphabet (Google), Apple, Amazon, Meta (Facebook), and Microsoft. The costs to date and projected costs to the companies for years are substantial.
Even worse are the potential DMA fines the EU can impose on the companies: up to 10 percent of their global revenue annually. Two percent of these companies’ most recent fiscal year revenue is $33.6 billion.
By contrast, Castro and Cuba’s communist regime confiscated $1.9 billion in U.S. assets, according to the Department of Justice, which reviewed all claims and determined 67 percent “to be compensable.”
Adjusting for inflation, the value of these claims in current dollars is $20.6 billion, just 1.2 percent of what the EU can seize in a year. In fact, the $20.6 billion calculation is high. For illustrative purposes, the preceding calculation assumes all assets were seized in February 1959, when Castro assumed power. However, the seizures took place later, thereby lessening the inflationary adjustment.
U.S. regulators have stood by and encouraged the EU regulators in these actions. The Federal Trade Commission and the Department of Justice’s Antitrust Division have greatly expanded their contacts with EU regulators, frequently collaborating on strategy and enforcement actions.
Beyond the tech companies, the EU’s actions pose a significant risk for U.S. retail and other investors. The earnings performance at these tech companies has been the major driver of the S&P 500’s strong performance in 2023-24, as these companies account for nearly a third of the index and have had a generally stellar performance.
With the EU imposing costs and other demands on large U.S. tech companies, the number of companies subjected to the DMA, DSA and other measures, could significantly expand. Other countries, including Japan, South Korea, Taiwan, Brazil and Turkey are contemplating implementing DMA-like programs.
While the Biden administration is willing to accept these economic risks and not defend U.S. companies overseas, former president Donald Trump took a different approach.
When France sought in 2019 to impose a digital tax against U.S. tech companies with revenues of more than $832 million annually, Trump responded with threats to impose tariffs on French luxury goods. France backed down, though the attack on U.S. companies has been resurrected by the EU.
Throughout our history and even in colonial times, the United States has seldom stood by while foreign governments stole from our people and our businesses. In fact, our revolution was rooted in this. It is time to tell the EU to back down or to consider decisive, retaliatory actions if these asset seizures, in the form of fines, move forward.
If the U.S. government does not advocate for and speak up on behalf of some American companies, it is open season for all American companies overseas. That danger must be promptly and immediately arrested, lest our economic sovereignty and prosperity be significantly degraded.
