As the latter categories are more representative of US exports, it would surely be an interesting escalation if other countries were to start including them in their “retaliatory” tariffs.
US has an imbalance on goods that was used to calculate the tariff amount, but it has the opposite imbalance on service from what I've read
In the US system of law, it is based on codified "rules". If you follow the letter of the rules you are fine - no fines.
The system of regulation at play here is the EU digital markets act. These laws are based on the effect of your actions, not the specific actions you undertake.
If the effect of the steps you take produce unacceptable outcomes, you pay fines even if you follow the requirements. The converse applies as well. If you ignore the rules but the outcome is in the spirit of the laws, then no fine.
The idea is to avoid malicious compliance but the cost of this is ambiguity in interpretation and also the market response to your actions might be genuinely surprising.
Here is a technical example to highlight the problem:
Apple were asked that you should allow independent browser technology implementations. They did this (to allow Google's technology to be employed as an example). But due to practical complexity they could not make progressive web apps work on iPhone (since they would need to route through the API which can be provided by Google's browser technology). So to comply with the rules, Apple disabled full screen PWAs and instead allowed them instead the web view area inside a browser, not full screen like a native app is experienced.
The EU regulatory body said revert that, and allow PWAs despite their own rules being then violated (as it would be using only Apple's browser technology) because the effect of allowing PWAs is a competitive marketplace for native app alternatives (web apps).
I do not like the idea that law can become a game of finding loopholes that go against the spirit of it, it's whack-a-mole that costs the State a lot to keep patching. I much rather have the system most of the EU has where subjectivity can play into decisions since some loopholes can be clever enough to work around terminology, jargon, and non-specificities to skirt around what's written while being opposed to the intent of the rule.
Companies can still contest, and bring forth cases to be reviewed to check if those solutions comply with the law, their lack of cooperation is a choice to drive a wedge between the citizenry and the regulations by non-complying and crying foul to the public to gather sympathy. That's an active choice, the companies could work with regulatory bodies to cooperate, and find a solution (I work at a company who did that for DSA) but most would much rather give a bad rap to regulations to turn the public against it.
Rule by law rather than rule of law?
There's no mind reading, most of EU's fines only happen after a pattern of non-compliance, complain as much as you want about EU's bureaucracy but it's quite cooperative if you want to figure out a solution. I prefer this system than one where the written laws are worth nothing since well paid corporate lawyers can figure a way out, or hell, they might even be paid to write the laws themselves as it happens in the US.
Most foreign extradition courts would laugh in their face for trying to use that, but if you have any assets in the EU (as most corporations inevitably will if they get big enough to go international) they can seize those as punishment for not following EU laws related to business conducted outside of the EU and that goes back to what OP tried to argue:
>if they don't break the law there's no way for the EU to collect the money
they actually can, because they can say you broke their law while conducting business outside of their jurisdiction that wasn't even illegal in the coutnry that actually had jurisdiction over that transaction.
GDPR covers people in the EU. Not EU citizens. Non EU companies can avoid GDPR liability complying with the law or not conducting business there.
Global companies have assets in the EU because they conduct business in the EU. International companies which do not conduct business in the EU do not have assets in the EU generally. And having assets in a jurisdiction subjects you to the laws of that jurisdiction obviously.
I'd like to know if you know what's you're talking about. In france the local subsidies are really low and the inversely the big rebates like "Tax Credit For Research & Dev" are for everybody, US companies like EU ones.
We're lacking VC funding, not skilled tech workers. Increasing visas for tech workers without increasing the funding just lowers wages which are already low.
Plus, EU visas are basically just rubber stamps anyway compared to how hard getting an H1B is.
Actually here's another unused pressure point, the EU can retaliate by making it as difficult for Americans to work in the EU as it is for EU citizens to work in the US. Why isn't it already reciprocal?
One facet could be increasing investment, VC and otherwise
_How_ you do that? I'm not sure, but I also doubt it's a completely unsolvable problem
Last I've looked "Lidl Cloud" from Schwartz-IT that is often mentioned as alternative is basically managed Kubernetes for more than double the price of Azure/AWS before rebates. They have that idiotic meaningless TÜV button on their websites and unfortunately it's not technical excellence but rather a trap for boomer CEOs...
Europe missed that boat unfortunately and I don't see that changing soon. Hetzner/OVH and so on only provide bare metal or virtual machines for little money but there is no European cloud with serious IaC and managed services that are stable and battle tested as far as I know.
Changing taxation rules is the interesting topic but unfortunately EU countries are competing on that and that would destroy the business model of countries like Luxembourg or Ireland - I'm all for changing it and it would be better in the long-term but it's probably impossible to pull off at the moment.
On the long term this can really make EU more sovereign, less dependent and it's not a crazy thing.
I have never understood the argument of "yeah tariff would hurt us because we are dependent on foreign tech". Yeah that's precisely a problem at a country level. Promoting local alternative is best than winner takes all.
There's also a price in not looking tough when you're getting bullied sometimes.
But if we are talking about tariffs (and not a ban) then a partial move is also relevant. And, at least in my anecdotal experience, a non-trivial fraction of our cloud-cost is pretty simple services which can be moved. It's almost like a 95/5 kind of thing, moving 95% of the stuff would take 5% of the time.
Having a hybrid cloud setup is clearly more hassel, but it's doable.
I suppose you could have a kind of tariff equivalent of the doomsday machine from Dr Strangelove, in principle; a set of automatic measures to come into force if the adversary does [whatever]. However, Trump strikes me as a bit of a General Ripper, so it might not be a _great_ idea.
Say an American multinational like Microsoft provides some SaaS. They have a division in Europe where their developers help make their products. They have offices, customer support, servers, etc. in Europe. Do they pay a partial tariff based on what fraction of the development of their software happened in the US? What if they sell the rights to the European version of their software to their European division?
Of course, the multinational could also use the funds to invest in Europe, build warehouse or commercial real estate or acquire European startups. I think they already do this to some extent to avoid US tax.
Using these to fund free credits to European cloud providers could be a good way to build up a local alternative. I think we underestimate the importance of free credits in the reliance on the 3 US hyperscalers, especially for startups.
Physical goods you can hold until tariffs are paid.
Services are paid for by invoices between two corporate entities whose legal domicile may have nothing to do with the real country of origin of the services.
Lots of European SaaS providers invoice US customers from their US subsidiary - impossible to distinguish the transaction in order to put a tariff on it.
Yes it would be a strong response, but unlike the US we are not interested in appearing like the strongest idiots, the EU would rather we all get along and trade. We'd rather work on real issues instead of this self damaging garbage.
when people in other countries use that at a non-trivial scale, aren't the servers on the other end of the connection still located in their region?
You can tax the "intellectual property" payments that the subsidiaries make to the USA parent, or you can pick some other criterion. Or you can just create a new sales tax for any one part of the transactions you want. It's tricky but it can be done.
Collecting taxes on goods flowing through a limited number of physical locations is much much easier than trying to audit the client list of a huge number of foreign service providers.
Agreed that other countries are considering this.
That's why you read things like «The Anti-Coercion Instrument (ACI), a nuclear option that has yet to be deployed, would empower the EU executive to hit U.S. service industries such as tech and banking». https://www.politico.eu/article/eu-trade-bazooka-anti-coerci...
You can just pick the top 10 biggest financial and tech firms and be done with it.
The US market is highly concentrated... right now because there are no tax benefits to being diverse. Apply significant tariffs to services and watch thousands of micro-service providers bloom.
There's really no "and be done with it" when it comes to tax policy. It's always an arms race.
None of this is to say that you couldn't tax service providers. Just that it's likely not as simple or obvious what would happen if you tried.
I'm confused. Are you saying this as if it were a bad thing?
Also note that the micro-service providers might just be white-label resellers of the big providers.
Which supports my general point that services are hard to tax because unlike physical goods you can't force them to flow through a few physical choke-points. The fact that economies of scale and other factors cause them to naturally collect in a few concentrated firms in the absence of taxes does not mean that you can just tax those concentrated firms because they will figure out ways to not get taxed!
If I order physical goods from a foreign nation it's gonna have to somehow get into my hands, and can be withheld until i pay tariffs
If a irish subsidiary invoices me subscription prices for intangible services, there's no way in the current legal world to enforce a tax on my end
I think there are some sound-bites from Trump-45 calling it a scam (in strong contrast to Trump 47) but even then then he never tried to do anything about it. If trump gets on Truth social tommorrow and fires off a tweet about how Bitcoin is a chinese threat designed to destablize US hegemony and circumvent tariffs and he's going to sign a legally-questionable EO to ban it, bitcoin's price would go up "bigly". Same would apply to the EU or any other major economy, although i will grant that it might not be to the same degree since nobody pisses people off the way trump does.
I.e. GameStop is all very impressive until you compare it to anything finance actually dumps money in by default.
If the pyramid is isolated it tops out somewhere a lot higher than now and then collapses for lack of a place to sell to next or an actual return.