As a business deal, Trump’s tariffs seem to make sense for Trump and Trump only: Trump, the shake-down artist. As many have pointed out, what the President gets out of this is a queue of CEOs begging him for exemptions; in return all he’ll ask is loyalty, public admiration and some display of … generosity. As economic policy for the country of which Trump happens to be president it is of course crazy – the tariffs are Smoot-Hawley Mark II, with some amplifying factors: economic activity in today’s world crosses borders a lot more than it did in 1930; nations are more specialized and thus dependent on exports and imports; production processes skip back and forth across borders, so that trade barriers will affect almost every manufactured product, even if made for domestic consumption; also, Trump’s mafia-boss shakedown mode, himself imposing and revoking tariffs personally as President, adds greatly to economic uncertainty, which will further undermine both capital investment and the purchase of consumer durables. So it’s mad, economically, we know that. That’s how mafias work, and how mafia states work: most people are losers, but the boss does well.

Trump’s tariffs and digital platforms

Still, Trump does have some constituents whose welfare he is concerned with. At this point his circle of concern may be small, but it does seem to include the oligarchs who back him, in particular those controlling big digital platforms: they are, now, his political base, those who stood closest to him, wives at their sides, while he was sworn into office. Are their interests threatened by a trade war? Spencer Hakimian hints at this risk in a post on ex-Twitter (sadly he doesn’t seem to be on Bluesky yet):

I reproduce this post because it offers a simple picture of America’s trading relationship with Europe, and for that matter with the rest of the world: the US exports less in the way of material things, more in the way of intangibles. A lot of the intangibles – what Hakimian calls “tech software and financial services” – are things controlled by big digital platforms, delivered over the Web: social media; internet search; the two smartphone platforms; the three major payment platforms (Visa, Mastercard and Paypal are behind Apple/Amazon/Google/Microsoft/Meta in market capitalization, but are still among the world’s most valuable companies); the biggest TV/movie/general video streaming platforms; the great suppliers of general purpose software (Microsoft, Adobe, Oracle…); Amazon’s everything store.

So is Trump, with his rash tariffs, endangering the lucrative platform business? At first look it appears not, but Europe could make it so.

It first appears not, because most of the platforms’ revenue isn’t from trade – it’s simply repatriated profits from overseas subsidiaries which export almost nothing from the United States; in other cases it is trade in digital services and as such exempt from tariffs under a WTO moratorium that’s been in place since 1998. Raising tariffs doesn’t hurt Amazon, or Visa, or Netflix.

The tariff exemption for streamed services may not last, though: large developing countries such as India and Indonesia have long opposed it, and will push again to end it in 2026. But the far bigger, and tougher, issue is the power of platforms when they aren’t selling anything across borders – they might sell advertising for their global platform locally in each country, or license rights to subsidiaries located there; indeed, much of what is now streamed internationally could probably also be handled that way, if the exemption which now protects them is lost, and could thus remain tariff-free. In this light Trump’s tariff tantrum might make some kind of avaricious sense – the US can put steep levies on imports of manufactured products and raw materials, while American digital platforms would continue to rake in revenues from around the world, tariff-free.

All countries will, of course, put up retaliatory tariffs on goods. This is necessary but just creates an unpleasant standoff in those markets where tariffs apply, while America’s platform oligarchs thrive unmolested.

Hit him where it hurts: Europe can take the fight to the platforms

Europe is in a position to do something about the power of the platforms: this would be good for European consumers and businesses, and bad for Trump. Which is to say, win-win.

The global dominance and immense profitability of the American platforms has been possible not just because those firms moved first to use web technologies, but also because governments have allowed it. To date, the only serious challenge has come from China, which has shut out many of the American platforms and fostered its own domestic Web giants, such as Tencent and Alibaba. Mario Draghi, in his influential report to the European Commission, advocates the creation of European mega-platform companies. Draghi writes in connection with concerns about European labor productivity – the value of output per hour of labor – which has not kept up with that in the US. He notes that the growth of America’s productivity advantage is due to “tech”. This is true and yet it also shows why productivity is, in this case, a very bad guide to policy: a highly profitable monopoly of course has high labor productivity, because the monopoly profits are part of value added – if you divide Microsoft’s profit by its number of employees, each of them looks quite productive. Europe’s economy lacks such big monopolies and is thus more competitive, which is a good thing for all but any would-be European oligarchs.

Moreover, even if Europe wanted them, it’s not clear it could create mega-platforms. The existing platforms benefit, in their nature, from huge scale economies. Replicating them would be impossible in head-to-head competition; China avoided head-to-head competition by simply shutting out the American platforms, but the China strategy is incompatible with an open society, and would also be economically destructive if replicated in Europe. (Europe could get serious about expanding its digital technology sectors, with an initiative such as Eurostack, but that does not require a monopolistic platform.)

What Europe can do instead is to get serious about instilling openness and competition in the markets now dominated by platforms. Platforms are network services – that is what gives them their scale economies and their power. A century and more ago, earlier generations of network services – railroads, electric power, landline telephones, and so on – were brought under either public ownership or strict regulation everywhere in the world, by governments of both right and left, both in countries with market economies and in those styled communist. The reason governments everywhere made that choice, independently of each other and for numerous different networks, is that these networks were essential for the modern economy, and no government could afford to let an economically essential network be held ransom by some robber baron.

The same goes for web services today. Why should you need to use Microsoft’s or Adobe’s proprietary product to make the files you create reliably readable by others? Why should you need to subscribe to multiple streaming services in order to have access to the occasional movie or sporting event of your choice? Why should the major online public marketplace, connecting buyers and sellers, be operated by a single extremely profitable company? Because our governments have allowed it, that is the beginning and end of the story.

What the platform oligarchs fear most is this: that parts of their platforms will be subjected to market competition, and other parts where competition is not feasible will become public utilities operating on the common carrier principal. To avoid that outcome, the oligarchs – most of them former liberals – are apparently happy to live in a fascist state. The reason they pivoted so decisively behind Trump in last year’s election is that the Biden administration had finally reversed America’s nearly fifty year retreat from anti-trust enforcement: an astonishing team including Lina Khan chairing the Federal Trade Commission, Jonathan Kanter heading the Justice Department’s Anti-Trust Division, Rohit Chopra heading the Consumer Financial Protection Bureau, and Tim Wu as Special Assistant to the President for Technology and Competition Policy, were at work battling the platforms in the American courts. So the oligarchs backed Trump, and won.

But won only in America. And now Trump is trying to bully the rest of the world on trade (and possibly on supporting the dollar), with the platform oligarchs at his back. Europe is a very large market, and the European Commission has responsibility for market competition throughout the EU. Anything Europe does to bring the platforms to heel can be – and will be – copied by other governments around the world: this is where Trump and his oligarchs can be beaten. The Commission does have ongoing efforts to bring the platforms into competitive markets – enough to make both Trump and the platform oligarchs upset, but far too slow, and on too many occasions too soft. Now that Trump has decided that Europe is his enemy, and has launched his crazy tariffs on the world, it is time for Europe to hit Trump, and his oligarchs, where it hurts.