Unlike physical goods, software and digital downloads have long been exempt from duties and tariffs. Many nations, including the United States, want to keep it that way.
In October, the Trump administration secured new trade deals with Malaysia, Cambodia, and Thailand that included a call for a permanent end to tariffs and taxes on digital goods and online services.
The agreements reaffirm the United States’ long-standing position that digital commerce — software, streaming, cloud storage, and similar services — should flow freely across borders, untaxed and unrestricted.
While this policy benefits large technology companies like Amazon, Meta, and Google, it also supports thousands of small and mid-sized ecommerce firms that sell digital products.
Digital Trade Policy
The World Trade Organization’s moratorium on customs duties on electronic transmissions is at the heart of modern digital trade.
First adopted in 1998, the moratorium restricts member countries from charging customs duties on digital goods and services delivered over the internet. WTO members have extended it multiple times. It will expire in March 2026.
President Donald Trump with Malaysian Prime Minister Anwar Ibrahim. Source: The White House.
The Trump administration wants to make the moratorium permanent. In the new trade pacts, the U.S. secured commitments from Malaysia, Cambodia, and Thailand not to impose digital services taxes or discriminate against American providers. The agreement with Malaysia includes language for permanent extension of the WTO moratorium.
The U.S. is not alone. On November 6, 2025, a coalition of nations from Africa, the Caribbean, and the Pacific proposed yet another extension of the same agreement. Support for tariff-free digital trade has become a rare point of consensus in an otherwise divided global economy.
Digital Trade and Ecommerce
The moratorium is important for ecommerce businesses, as it affects the software they use and their digital products.
Without the tariff ban, duties could apply to:
- Software-as-a-service tools like BigCommerce or Adobe Creative Cloud,
- Digital downloads such as ebooks, sheet music, or stock photos,
- Streaming and cloud platforms like Netflix and Amazon Web Services.
The WTO rule has created an open digital marketplace, allowing small firms to reach global customers with minimal friction. Keeping it in place preserves the status quo.
If the moratorium were to lapse, governments could begin taxing digital transactions, such as a subscription to Shopify (Canada) or PrestaShop (France). Digital products such as online courses or downloadable sheet music might also face tariffs.
Physical Tariffs
While it continues to promote duty-free digital trade, the United States has recently closed a gaping tax loophole in physical commerce: the de minimis tariff exemption.
That rule, which allowed low-value imports into the United States duty-free, expired at the end of August 2025. Since then, some orders entering the country have been subject to customs duties and inspection.
For select U.S. retailers, the change has been welcome. These companies argue that the exemption gave foreign sellers an unfair edge by letting them ship cheap goods directly to U.S. consumers without paying import taxes or local fees.
China, for example, leveraged its controlled economy and demand for hard currency to gain a further ecommerce advantage — again, putting American retailers at a disadvantage.
A similar debate is emerging in Latin America. Speaking at a conference in Buenos Aires in November 2025, Juan Martín de la Serna, head of Mercado Libre Argentina, called for tighter regulations, e.g., tariffs, on low-cost Chinese goods.
“The influx of cheap, low-quality imports from China risks undermining small and medium-sized businesses,” de la Serna said.
Mexico, Chile, and Uruguay have already tightened import and tax rules on those shipments. These arguments echo the U.S. position.
Controlled Advantage
China’s hybrid economy is a blend of free markets and state control. While it has many drawbacks, the arrangement gives its exporters advantages in both manufacturing and ecommerce.
The Chinese Communist Party can direct credit, manage currency values, and subsidize key industries, from logistics to artificial intelligence.
These levers help Chinese sellers offer products at prices that independent retailers elsewhere find difficult to match.
Local governments often provide tax rebates and cheap loans to manufacturers that sell through cross-border platforms, while the central government encourages ecommerce exports as a source of hard currency.
This state-supported structure aids China’s ecommerce giants.
2 Policies
Many of the same imbalances that define the global trade of physical goods have surfaced in digital products.
Controlled economies can dominate digital markets by shaping access to data, funding domestic tech giants, and restricting foreign competition. In China, for example, strict data-localization rules keep Western platforms out while homegrown firms expand abroad.
Low wages and intense labor conditions extend beyond factories into the digital workforce, from content moderation and customer support to the new wave of generative AI data labeling.
Even artificial intelligence itself reflects global inequality. Chinese models trained on Western data are increasingly deployed by state-backed enterprises, reinforcing competitive differences.
Nonetheless, worldwide business is complex, so in a sense, the differences in U.S. policies toward physical and digital goods could serve as a policy test. Which philosophy, protectionism or unfettered access, proves the most successful to business and, importantly, to consumers?
