Introducing Tariffs on Internet Traffic

Digital Trade War: how would tariffs on digitally imported goods impact the Internet infrastructure as we know it today?

humorous image of trump applying tariffs to digital goods

Recently, the government of the United States has raised broad awareness on the importance of trade in a globalized world by introducing high tariffs on imported goods. [1]. These tariffs only apply to (a selection of) physical goods.

However, the digital world and its central “market place” – the internet – has so far been spared from similar encroachments. Yet, given the current pace, it is quite natural to ask the question: how would a a tariff on digital goods impact the internet landscape? And how can we best prepare for it?

Last year, the World Trade Organisation (WTO) renewed their tariff moratorium on electronics transmissions[3]. This trading agreement, originating from 1998, requires renewal every two years and forbids countries to tax digital goods. Some countries have already opposed themselves to this moratorium and it seems that, as more and more companies digitalise, it might only be a question of time until intagible goods become taxed more broadly (already some journalists speculate the emergence of this trendFinancial Times, and others deplore it via an open letter). Similar to “normal” tariffs, the main argument of predominantly lower-income countries exploring this source of “revenue” is their lopsided trade balance of digital goods towards high-income countries, resulting in lost gains within their own economy. Further, digital companies (tiktok, youtube, amazon, …) “freely” ride on the internet infrastructure (which is oftentimes subsidized by the government). This additionally incentivises taxing the flow of traffic. Despite these trends, a transparent and definitive definition of digital goods is not clearly established and even less a governing taxation or tariff framework [4]. (In a recently published report, KPMG has additionally explored the question of how intellectual property payments effect these tariffs [2].)

Plan

This thesis is rather open ended. However, apart from establishing a more research driven theoretical framework on classifying and taxing digital goods, we believe it is important to setup and perform an experiment that could show the impact of taxation, given some assumptions, in at least one case-study. A possible timeline of workpackages could look something like this:

  1. Review relevant literature in previous attempts to tax digital goods.
  2. Cluster internet products: which subgroups are there? And which parallel can we draw with physical goods?
  3. What type of taxation models can we think of for digital goods?
    • Can existing tariff schemes be adapted to fit digital goods?
    • Apply general per bit tax
    • Apply per bit tax on specific product groups
  4. What are the technical implications and feasibility of different taxation models?
    • Can we classify traffic into specific product groups?
    • At what level should the taxation occur (e.g., ISP level)?
    • Could we require companies to label data (analogously to labelling the contents of parcels)?
    • How should we deal with VPNs, encrypted data etc.?
    • What are the resulting attack vectors (e.g., “DDOS” on a taxed endpoint)?
  5. Perform a case study on establishing tariffs for a specific tariff model and/or subgroups:
    • Would it change the internet dynamics and landscape?
    • Would it relocate companies or their datacenters?
    • How to deal with private WANs?
    • Would it drive customers to use more local solutions?

Requirements

  • An appeal to economics, policy, regulations and game theory.
  • Some basic knowledge of the Internet infrastructure.

References

  1. Donald J., Trump. “FURTHER MODIFYING THE RECIPROCAL TARIFF RATES” Executive Orders of the White House, July 31, 2025.
  2. Andrew Siciliano, Elizabeth Shingler, and Lizeth Azuara (KPMG US) “How Intellectual Property Payments Impact US Tariffs on Goods”
  3. David Lawder (REUTERS) “WTO e-commerce tariff moratorium wins temporary reprieve”, March 2, 2024.
  4. Public Citizen, “Fact Sheet: WTO Moratorium on Customs Duties on Electronic Transmissions”, Febuary 16, 2024.
  5. Lloyd Brown et. al. “Principles for Internet Congestion Control Management”. SIGCOMM ‘24.

Supervisors

Benjamin Hoffman
PhD student
Jean Mégret
PhD student