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Is it just the historical legacy of international trade that tariffs apply only to physical goods, but not to something like software-as-a-service subscriptions
by compumike 1y ago
Is it just the historical legacy of international trade that tariffs apply only to physical goods, but not to something like software-as-a-service subscriptions, digital media, or intellectual property?
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.
- benob 1y agoThis is exactly what EU is discussing
- Nemo_bis 1y agoIndeed. There are many options on the table. https://www.politico.eu/article/belgium-brussels-amazon-google-meta-ursula-von-der-leyen-tech/ https://www.politico.eu/article/belgium-brussels-amazon-goog... https://www.politico.eu/article/eu-trade-bazooka-anti-coercion-instrument-donald-trump-tariffs/ https://www.politico.eu/article/eu-trade-bazooka-anti-coerci... https://www.euractiv.com/section/tech/news/france-singles-out-digital-services-for-eus-tariff-response/ https://www.euractiv.com/section/tech/news/france-singles-ou...
- davidguetta 1y agoI still wonder why this was not done instantly by EU. 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
- kansface 1y agoThe EU effectively backdoors tariffs against US software vendors via fines and the occasional if ineffective subsidy for local competitors in the local language.
- piva00 1y agoNo, fines are for breaking the law, if they don't break the law there's no way for the EU to collect the money. It's like speed traps, people can be mad at them because they broke the law and were caught, it doesn't alleviate the fact they could have just followed the rules.
- magicloop 1y agoSadly this is not the case in relation to EU laws. 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).
- piva00 1y agoI prefer a system of rule of law that covers the spirit of the law rather than the letter. 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.
- foepys 1y agoEasy: because next to 100% of EU government computers run Windows and MS Office.
- alickz 1y agoSeems like a vulnerability
- alpha_squared 1y agoSome part of me feels like (and hopes?) this could create a golden era for tech in the EU. Competing operating systems, productivity software, SaaS solutions. If I had any say in the EU right now, I'd look at ways to increase visa access for disaffected tech workers looking to leave the US turmoil.
- FirmwareBurner 1y ago> If I had any say in the EU right now, I'd look at ways to increase visa access for disaffected tech workers looking to leave the US turmoil. 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.
- alpha_squared 1y agoThat might be true, I wouldn't know -- but I do know a lot of EU countries have visas for skills shortages and software is listed among those skills. I assumed that meant there's an opportunity to expand and expedite access if the need was more imminent.
- FirmwareBurner 1y agoJust because companies say they have skilled shortage doesn't make it true. They're mostly just picky and want to put pressure on wages. I also have a Ferrari shortage, so we need to make more Ferraris. 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?
- nisa 1y agoIt would be a just a hefty fee for most EU companies and not much more. From what I've seen Azure is pretty popular in most bigger companies and smaller shops and websites use often AWS or Google cloud. Microsoft Windows and Office is also everywhere - it would be a tax on European business with little effects on the USA because moving away from big clouds won't happen because there is no realistic alternative. 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.
- davidguetta 1y agoYeah sure but then you do promote EU alternatives out of necessity. 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.
- Epa095 1y agoBoth OVH and scaleway provide managed k8s (and both have terraform providers). But yes, definitely much less sophisticated than the hyperscalers. But if you use k8s, maybe s3 and Kafka, and some databases, it's definitely possible to do the switch.
- erulabs 1y agoSwapping an enterprise’s cloud provider is at least a 6 month endeavor and that would be with all hands on deck, I estimate two years at least and that’s still with significant tail wind. While things are crazy, best bet is to hold tight and sign the checks and prepare.
- amelius 1y agoWhat I don't understand is why other countries didn't make the threat to make any tariffs hold for a year or longer. That would scare Trump away from doing these stupid experiments.
- stubish 1y agoWhy would other countries inflict that sort of self harm? It would be a bluff, and everyone knows it. If it wasn't a bluff, you would be out next election.
- amelius 1y agoThere is something to be said for stable economic policy making. EU could say that they're not going to be a leaf in the wind, and it would be a totally understandable position.
- rsynnott 1y agoThe whole point of imposing retaliatory tariffs is that it puts pressure on the aggressor to give up, on the basis that you will then immediately drop the retaliatory tariffs. The point is to produce a quick end. Retaliatory tariffs with a _minimum_ duration would be counterproductive. 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.
- amelius 1y agoWell, you could make the duration of the retaliation short. The point is that you make clear that you don't tolerate being played.
- nearbuy 1y agoHow would it work? 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?
- guizmo 1y agoIt would need to be a tax on money transfer to the American counterpart. Cash repatriation or payment for IP rights comes to mind. 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.
- deleted 1y ago[deleted]
- throwawaymaths 1y agoYes, that makes sense for Europe but it doesn't help China, because China already prevents a considerable amount of US media consumption and much of what is consumed is bootlegged anyways.
- kowabungalow 1y agoI'm also not sure why other countries aren't moving to criminalize trading crypto to try to tank him and his cronies since the US has given up on preventing presidential conflict of interest.
- snickerbockers 1y agouhhhhh if you want bitcoin and etherium to moon the best thing you could do for the crypto-community would be to present it as a tangible threat to your country's political and financial elite due to existing outside the confines of their regulatory powers.
- kowabungalow 1y agoWhen the IRS left it in the grey zone it wasn't really going to the moon because every financial advisor couldn't say 5% of you retirement should be in an investment we can't sell you. It would take a lot more and richer people with oppositional disorders to make up for some universal retirement "just in case" advice.
- snickerbockers 1y agoThat's my point, for the first decade or so they didn't even bother considering it to be a taxable form of income, which sent out the message that it's not a significant threat to the US government. In the time since all they've done is tax it the same way they tax conventional fiats; it's never been treated as a credible threat by the United States government. 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.
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- tow21 1y agoMuch harder to enforce against services. 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.
- taeric 1y agoI'm curious what sort of "as a service" things you would have applied this to in the past? Seems like a simple answer of "yes" as to whether how we collected taxes in the past were largely a legacy of how trade happened?
- ianferrel 1y agoI think partly the historical legacy, but also the ease of enforcement and the fact that lower tariffs and services have trended together. 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.
- Nemo_bis 1y agoYou don't need to hit a huge number of service providers because the USA market is highly concentrated. 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-coercion-instrument-donald-trump-tariffs/ 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.
- ianferrel 1y agoThis strikes me as the sort of first-order thinking that often plagues ideas about macroeconomics. 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.
- Nemo_bis 1y ago"watch thousands of micro-service providers bloom" I'm confused. Are you saying this as if it were a bad thing?
- ianferrel 1y agoI'm saying that "You don't need to hit a huge number of service providers because the USA market is highly concentrated" is not a good argument because the act of taxing the concentrated incumbents will cause changes. 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!
- snickerbockers 1y ago>software-as-a-service subscriptions 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?
- mort96 1y agoSure, but when we pay our AWS bills, that money still goes to Amazon which is US-based, even though we servers we rent are in Frankfurt.
- johntb86 1y agoDoes it actually go to the US corporation, or to some European subsidiary?
- Nemo_bis 1y agoFor hyperscalers, to some EU subsidiary first. Then it depends on the transfer pricing applied. https://en.wikipedia.org/wiki/Transfer_pricing https://en.wikipedia.org/wiki/Transfer_pricing 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.
- delusional 1y agoThe EU is discussing it, but are currently debating if that would be seen as an escalation of the conflict. 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.
- marcosdumay 1y agoThe Brazilian Congress finished approving a law yesterday granting the president powers to retaliate by voiding intellectual property.
- krsdcbl 1y agoEnforcement will be the issue here. 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