However, some smaller countries fear the proposed tax would undermine their ability to attract multinationals and see the measure as more likely to shift tax revenue to bigger European Union countries rather than raising more money. In documents leaked before Wednesday's announcement, officials estimated that digital businesses in the bloc pay an average effective tax rate of just 9.5 percent, compared with 23.3 percent for traditional businesses.
The new tax proposal comes after the European Union and national governments in Europe have faced criticism for continuing to allow multinational tech firms to make use of legal loopholes to pay low levels of tax by declaring their profits in smaller countries such as Luxembourg or Ireland that have lower tax rates.
The EU tax plan will target mainly United States firms with worldwide annual turnover above €750 million, such as Facebook, Google, Twitter, Airbnb and Uber. "We would prefer rules agreed at the global level, including at the OECD", Valdis Dombrovskis, Europe's vice-president for the Euro and social dialogue said.
The European Commission has proposed that, if tariffs are imposed, the bloc should challenge them at the World Trade Organization, consider measures to prevent metal flooding into Europe and impose import duties on U.S. products to "rebalance" EU-U.S. trade.
Tech industry groups have complained that it is wrong to tax revenues as that would unduly hit companies.
In the meantime, it wants to introduce an interim tax based on revenues "created from certain digital activities which escape the current tax framework entirely".
In order to avoid the burden of double taxation, minimum thresholds would be applied which in turn will signify the tax being subjected to the tech giants and help the payment be deducted from the contributions of their corporate tax.
"The Commission's proposal for an interim tax on revenues from digital activities, looks similar to the UK's proposal to tax "user generated" value", said Catherine Robins a tax expert at Pinsent Masons, the law firm behind Out-Law.com.
Digital start-up and scale-up companies in particular should welcome the legislation as it will allow them to compete on a more equal basis with market incumbents, and will cost them nothing - at least until they reach the same size.
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs said: "The digital economy is a major opportunity for Europe and Europe is a huge source of revenues for digital firms". "The US firmly opposes proposals by any country to single out digital companies", he said.
Trump is planning to impose tariffs of 25 percent on imported steel and 10 percent on aluminum.
Latvia has already said it will make expulsions, EU President Donald Tusk said more steps were expected as early as Monday and German Chancellor Angela Merkel said further coordinated actions were "necessary" to respond to the attack.