Per NFL Network's Ian Rapoport, the Giants are using the tag as a "placeholder" with the goal of working out a long-term deal with Williams.
If the two sides don't work out a long-term extension, the tag will cost the team $19.3 million in 2021 since it will mark his second straight year of receiving the franchise tender.
Spotrac estimates that New York has $13.1 million in cap space available not factoring in Williams' deal. The NFL has yet to officially set the salary cap for 2021, but NFL Network's Mike Garafolo reported last month an internal memo from the league to teams said the cap floor would be $180 million.
Pro Football Focus ranked Williams as the 19th-best free agent available this offseason, calling him "one of the surest bets in the class" because of his steady year-to-year performance since entering the NFL in 2015.
Williams would seem to have a lot of leverage in his contract negotiations with the Giants. The 26-year-old set career highs with 30 quarterback hits, 14 tackles for loss and 11.5 sacks in 16 games last season.
The Giants acquired Williams from the New York Jets in October 2019 in exchange for a 2020 third-round draft pick and a 2021 fifth-round draft pick.