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Digital Trade War That May Spice Up the Digital Era

Daniel Kim Views  

The digital trade war targeting U.S. tech giants is intensifying worldwide. Alongside the European Union (EU) overtly implementing the Digital Market Act (DMA), traditional U.S. allies such as Canada and Japan are also pushing extensive tech regulations. Following Huawei, China, on the verge of losing TikTok, fiercely retaliates across all sectors, including semiconductors and software. As U.S. tech giants dominate the global market, countries seem to respond with trade barriers.

On the 21st (local time), the Wall Street Journal (WSJ) reported, “The U.S.-China internet war is escalating due to the U.S. House’s ban on TikTok.” It pointed out that the Chinese government is responding by completely blocking the services of meta social network service (SNS) platforms WhatsApp and Threads in China, following the U.S. Congress’s forced sale of TikTok.

In China, the use of American platforms is officially impossible. However, detours using Virtual Private Networks (VPNs) are very active. Market research firm Sensor Tower has reported that Instagram, X (formerly Twitter), Facebook, YouTube, WhatsApp, and others have been downloaded more than 170 million times from the Chinese Apple App Store over the past decade. The WSJ reported, “China has asked Apple to block the U.S. platform bypass route, citing national security, the reason the U.S. forced the sale of TikTok.” China also shows a move to decouple from the U.S. in the semiconductor and operating system (OS) sector. Recently, there have been reports that they are expelling Intel Corporation·AMD Central Processing Units (CPUs) and Microsoft Windows OS from national institutions.

America’s allied countries are also escalating their offensive against big tech. Bloomberg recently reported, “The Canadian government is pushing for the introduction of a digital service tax targeting big tech.” The bill adds a 3% tax on digital service companies with global sales exceeding 1.1 billion Canadian dollars (approximately $880 million) and earning more than 20 million Canadian dollars (roughly $16 million) in Canada. The targets are Google, Meta Platforms, and other big tech companies. The U.S. Congress has threatened retaliatory measures if the digital service tax legislation is passed. Last October, David Cohen, U.S. Ambassador to Canada, warned, “If the bill is not resolved, there could be a major dispute.” However, as the Canadian government and Congress are firm in their intentions, a digital trade dispute between the U.S. and Canada, traditional allies, seems inevitable.

The EU, which introduced the DMA, the American Big Tech Sniping Act, is at the forefront of extensive global tech regulation. The law applies to all U.S. companies except ByteDance, the operator of TikTok, and a fine of up to 20% of global sales is possible in case of violation. The EU has already started an official DMA investigation into Apple, Google (Alphabet), and Meta and has suggested the possibility of an antitrust investigation into MS’s investment in OpenAI. Japan recently introduced the Smartphone Competition Promotion Act targeting Apple and Google. Similar to the DMA, it is expected to include provisions that require opening external app markets and prohibit favoring their own services. A fine of up to 30% of domestic sales is planned in case of violation. South Korea is also pushing to introduce the Platform Law led by the Fair Trade Commission. However, there are concerns that it could become self-destructive and only hinder Korean companies due to the solid domestic platform conditions.

Daniel Kim
content@viewusglobal.com

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