By Emily Cadei |
People meet virtually over a Zoom call. | Cedar Attanasio/AP |
While President Donald Trump and his administration fixate on the country’s “trade deficit” in goods — the physical things we buy and sell around the globe, from auto parts to pharmaceuticals to pistachios — there is a whole other category of trade that American companies dominate. The U.S. has long had what’s known as a trade surplus in services, which includes things like travel, financial services, software licensing and intellectual property. In 2024, the U.S. exported $1.1 trillion worth of such services, over $300 billion more than the country bought from abroad, according to Commerce Department data. It’s a major revenue driver for America’s financial sector, tech companies and tourism industry, among others — but it’s under growing threat. As it stands now, the biggest foreign market for U.S. services is Europe, which has become heavily reliant on U.S. tech platforms, among other things. Trump’s return to the White House, however, is accelerating a push for “digital sovereignty” on the continent, replacing American tech with European alternatives. The latest example: France’s decision earlier this week to ban public officials from using American platforms including Google Meet, Zoom and Teams for video conferencing beginning in 2027, and replace them with a French alternative. “One of the huge benefits” of the existing trade system “is that we have built a specialization in incredibly high-fixed cost, high-skilled technologies that are really only feasible if you can then sell them around the world,” says Phillip Luck, director of economic programs at the Center for Strategic and International Studies, a D.C.-based think tank. As global trade patterns and traditional alliances start to splinter, those markets could shrink — with implications not just for U.S. companies’ bottom lines but for future homegrown tech innovation. “If you’re in Europe right now, you’re waking up to the realization that your entire economy relies on U.S. cloud services and Microsoft Outlook and Excel,” says Luck, who served as deputy chief economist at the State Department under former President Joe Biden. And Trump’s regular broadsides against Europe, most recently threatening to take over Greenland, have heightened fears there that he could flip a “kill switch” to cut digital services through American tech giants. In the Netherlands, 140,000 people signed a petition submitted to the government this week asking it to block the acquisition of a Dutch online identification tool by a U.S. company for just this reason. The Greenland dust-up and other Trump attacks on Europe have “all been gasoline thrown on the fire,” says Daniel Castro, vice president of the Information Technology and Innovation Foundation, a tech policy think tank that receives funding from U.S. corporations. The ultimate goal of Europe’s digital sovereignty movement — building a “EuroStack” of digital infrastructure independent of U.S. technology — would be a body blow for the U.S. services trade. And it could also slow future innovation, both at home and abroad. Building alternatives to video conferencing services like Zoom and Team, is doable, says Castro, “but they’re going to take a couple of years to get there and they’re missing out on all the changes that are happening” in the technology, in the meantime. Constructing data centers or developing a substitute for the Microsoft suite of products — if European countries decided to go that far — would require exponentially more investment. “The fixed costs to building these things is enormous,” notes Luck. Companies on both sides of the Atlantic will have less opportunity to recoup those costs if they no longer sell as much to each other. “It’s not just wasteful,” says Luck. “A huge amount of the revenue that’s powering [the AI] buildout here is revenue from Europe — Meta and Google and others earning revenue in other countries and reinvesting that in the United States.” Castro warns that a Europe-U.S. tech divorce would likely “give the advantage to China,” as Beijing plows ahead with its own massive research and development investments. “Long term, that’s the real prospect, that’s the real risk.” |