In January 2025, President Donald Trump—now serving his second non-consecutive term—unveiled a sweeping tariff regime designed to recalibrate America’s global trade relationships. Among the measures was a blanket 10% tariff on all imported goods, accompanied by higher, so-called “reciprocal” tariffs targeting specific regions: 20% on EU imports and a dramatic 145% on goods from China. While these heightened rates were temporarily paused on April 9, 2025, for 90 days (excluding China), the 10% baseline tariff remains broadly in effect, symbolizing a shift toward an overtly protectionist economic doctrine.

Yet this new wave of protectionism extends far beyond traditional sectors like steel, agriculture, or energy. It has opened a new, largely invisible front: the battle over digital services and internet governance. At the center of this fight are Digital Services Taxes (DSTs)—fiscal mechanisms adopted or proposed by a growing number of nations, including France, India, the UK, and Canada. These taxes aim to ensure that multinational digital corporations contribute fairly to local economies, especially in jurisdictions where they generate substantial revenue without a physical presence. DSTs typically target revenues—not profits—derived from services like online advertising, digital marketplaces, and monetization of user data, exposing deep flaws in traditional tax frameworks ill-equipped for the digital age.

For instance, France has implemented a 3% DST on revenue from digital services provided to French users, while the UK imposes a 2% levy on earnings from search engines, social media platforms, and online marketplaces. These unilateral measures have emerged amid mounting frustration over the slow pace of global tax reform and the collapse of the OECD’s Pillar One negotiations in 2024. As consensus faltered, countries began to act independently—plugging fiscal gaps with DSTs, while triggering strong responses from Washington.

The Trump administration sees these taxes as targeted attacks on American tech giants. In January 2025, Trump formally withdrew the United States from the OECD’s digital tax negotiations, signaling a rejection of multilateralism in favor of an aggressive, unilateral trade strategy. Retaliatory tariffs under Section 301 of the U.S. Trade Act were imposed on countries implementing DSTs, including France, the UK, Italy, Spain, Turkey, and Austria. In February 2025, Trump’s administration escalated further, threatening to invoke Section 891 of the U.S. tax code—an obscure statute that would double corporate taxes on firms from countries taxing U.S. digital companies.

These moves sparked fierce backlash in Europe. On April 15, 2025, French Prime Minister François Bayrou described the U.S. strategy as a “hurricane” of destabilization, urging a unified European response. The European Union, for its part, has made clear it will not dilute its digital regulations for the sake of a U.S. trade deal. This escalating standoff exemplifies the broader thrust of Trump-era trade policy: confrontation over compromise, national advantage over global consensus, and short-term leverage over long-term stability.

The fallout for the technology sector has been immediate and widespread. Companies like Apple—which depends on complex global supply chains and derives more than 60% of its revenue from international markets—are facing mounting pressures. While iPhones and some other consumer electronics from China were briefly exempted from the 145% tariffs imposed in April 2025, uncertainty looms, and the company is already shifting parts of its production to India. Semiconductor firms and cloud service providers are also grappling with higher costs on critical components such as AI chips and data center servers.

At the macroeconomic level, markets are reacting with volatility. Indices like the Nasdaq and S&P 500 have endured sharp corrections amid rising fears of a global recession triggered by digital trade disruption. Investors are pricing in not just the direct financial impacts of tariffs, but also the broader regulatory risks posed by the proliferation of DSTs and the creeping threat of internet fragmentation.

And this is where the stakes become existential. The clash between DSTs and retaliatory trade policies is not merely an economic battle—it is reshaping the very architecture of the global internet. As more countries erect fiscal and regulatory barriers in the name of digital sovereignty, the once-unifying dream of a borderless, interoperable internet is giving way to a fragmented digital terrain defined by jurisdictional silos and incompatible standards.

This shift directly challenges the multistakeholder model of internet governance long championed by institutions like ICANN (the Internet Corporation for Assigned Names and Numbers). ICANN’s authority rests on collaborative, non-sovereign, globally inclusive processes—values that are increasingly threatened by the rising tide of digital nationalism. As states assert control over data flows, digital platforms, and taxation, the model of an open and interoperable internet risks being eclipsed by competing, state-centric visions of digital order.

The upcoming WSIS+20 (World Summit on the Information Society) review, originally intended as a moment to celebrate two decades of digital progress and global cooperation, now unfolds against this backdrop of deepening division. Rather than reinforcing global commitments to inclusive digital development, it has become a forum for competing geopolitical visions. Some nations advocate renewed multilateralism through institutions like the United Nations or the OECD, while others—chiefly the United States—pursue bilateral trade weapons and economic coercion.

Caught in the crossfire are smaller economies and global users who lack the bargaining power to shape these geopolitical decisions. For them, the spiraling digital trade war is not just a tax or a trade issue—it’s a threat to access, innovation, digital rights, and the future of global connectivity.

What began as a debate over tax fairness has morphed into a contest over who gets to write the rules of the internet economy. With the United States aggressively defending its tech sector and other countries asserting fiscal sovereignty, the world is entering an era of contested digital governance. Whether the internet evolves as a shared global commons or fragments into isolated walled gardens will depend on choices being made right now.

The solution lies not in doubling down on protectionism, but in revitalizing global cooperation. Despite its recent setbacks, the OECD framework still offers a viable path forward. New forms of digital diplomacy are urgently needed—ones that recognize the legitimacy of local fiscal needs while resisting the pull of economic unilateralism. Institutions like ICANN, WSIS, and the WTO must be empowered, modernized, and supported to reflect the complex interdependencies of digital trade, taxation, and governance.

Absent such reforms, the digital world risks mirroring the fractured, conflict-ridden terrain of traditional geopolitics. And in an age when digital infrastructures underpin everything from health care and education to democratic participation, the consequences of failure will be far-reaching and irreversible.