Are digital taxes the new frontline in global trade warfare?
This situation reveals governance deficiencies, particularly as existing World Trade Organisation (WTO) rules are inadequate for addressing digital trade disputes.
While President Trump’s tariffs on goods dominate headlines, a more consequential battle is brewing over digital services. US tech giants like Meta, Google, and Amazon wield unparalleled global dominance in this sector.
In just-in-time analysis, Jovan Kurbalija argues that Trump’s fixation on traditional trade levers (steel, cars) overlooks a critical vulnerability for the United States: the use of digital services taxes (DSTs) and regulatory pressure by the EU and other trading partners to counterbalance new US tariff.
The collapse of OECD-led multilateral tax negotiations in 2024 has triggered a resurgence of unilateral DSTs, from Canada’s retroactive levy to India’s expanded ‘equalization levy’ and revived EU proposals for bloc-wide digital taxes.
Kurbalija analyses how digital taxation redefines trade diplomacy, with implications ranging from recalibrated leverage (host nations exploiting US tech dependence) to governance gaps (WTO rules ill-equipped for digital disputes). It poses new challenges for digital diplomacy, AI negotiations, and internet governance.
He warns that failure to address this ‘invisible trade war’ could escalate tit-for-tat measures, jeopardizing both physical goods trade and the digital economy. The rise of data and sovereignty will be inevitable.
Ultimately, the piece underscores a paradigm shift: in the 21st-century economy, algorithms, and data flows are as strategically vital as steel beams—and more impactful for economic well-being and global prosperity.
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