Tariffs on Data

If you happen to follow the news, even superficially, you can’t have missed the looming trade war between the United States and, well, everyone else.

On June 1st, the Trump administration announced its decision to impose tariffs on steel and aluminum imports from Mexico, Canada, Brazil, South Korea and EU. These countries were temporarily excepted from the initial tariffs imposition against all the other countries of the world back in March. Australia continues to be excepted.

Retaliation came back almost immediately from Canada, Mexico and the EU.

To be honest, I know very little about steel or aluminum and it is not my intention to write about their tariffs.

The problem with trade wars is that they are rarely contained in a number of products. Retaliations lead to escalation and before you know it, it’s an all out trade war on everything.

In such a case all lose. But who loses the most?

I think it will be the US.

But not for the usual reasons cited by free trade proponents.

They will lose because retaliations will hurt their most dominant sector. How? Read on.

On May 25 the new European GDPR regulation took effect. Although it is far from been implemented yet, it shows that it has an impact. The major US companies hurried to comply while others even stopped operating in EU.

If we want to be completely honest, GDPR is as much about privacy as about against the expansion of FAMGA (Facebook, Apple, Microsoft, Google, Amazon) and more in EU. Or, at least, about curtailing their dominant position. And the current US administration already views it this way.

But that’s not all.

There is still an open discussion about the imposition of a special tax on digital ad revenues and subscription fees.

The levy, which is likely to be set at a rate of 3 per cent, will be raised against advertising revenues generated by digital companies such as Google, the fees raised from users and subscribers to services such as Apple or Spotify, and the income made from selling personal data to third parties.

The current estimation is that such a tax will raise approximately 5 Bio Euros. Not one of. Per year.

With EU data harvesting contained through GDPR and their revenues taxed, the big US companies, and, consequently, the US, will suffer a setback to the only foreign big market they play uninhibited.

In China and Russia FAMGA face strong local competition. Think of Baidu and Yandex versus Google. VKontakte and Tencent versus Facebook. AliBaba versus Amazon etc. These companies thrive, partly because of language and culture barriers, and partly because of legal ones.

Europe has no comparable players. It never had.

Depending on the length and depth of the trade war, more barriers can and will come up from the EU side. And, I dare think, this will open a window of opportunity for the emergence of “local” FAMGA competitors, something currently unthinkable.

If this happens, then the US will lose a huge advantage and a huge leverage in the international arena. Both technological and strategic. Even if no competitors show up, a significant amount that could flow in the US, will stay in EU. But US may gain another four years of Trump. Oh, well!