Startup News Digest 04/03/26
The Big Story: Foundational trade policy lapses, opening the door to tariffs on digital goods
A long-standing global policy that prohibits digital tariffs has lapsed, creating new uncertainty for startups that rely on selling software and other digital services across borders. Earlier this week, policymakers at the World Trade Organization’s ministerial conference failed to reach consensus on renewing the long-standing moratorium on customs duties for electronic transmissions, allowing the policy to expire for the first time since it was adopted in 1998. The lapse raises new questions about whether countries could eventually begin imposing tariffs on digital trade.
The e-commerce moratorium has been a foundational Internet and international trade policy that helps startups grow globally by ensuring tariff-free digital trade. Startup founder Dr. Olivia Walch previously explained the importance of the moratorium in Congressional testimony and urged policymakers to “make it permanent.” A permanent ban on digital tariffs was the ask of trade ministers from Engine and a global coalition of more than 100 business organizations and industry groups ahead of the ministerial conference as well.
The U.S. entered the conference with a proposal to make the moratorium permanent, before compromising with trading partners on various proposals for longer-term extensions. The conference went into overtime as negotiators seemed to coalesce around a five-year extension, but it was ultimately blocked by Turkey and Brazil. The Trump administration used its tariff leverage-based trade deals to shore up support for the moratorium ahead of the ministerial conference, which converted some long-time opponents of the moratorium. But the administration’s tariff moves may have also played some unsaid role in the outcome, given the tense back and forth between Trump and Brazil over the past year. Despite the disappointing outcome, countries are not expected to immediately begin imposing tariffs on electronic transmissions. Trade officials are expected to revisit the issue at the World Trade Organization’s next General Council meeting, likely in May, where negotiators should prioritize reaching a durable outcome that restores stability for startups that sell digital goods globally.
Policy Roundup:
Congress debating controversial spying power. Congress is debating an extension to Internet surveillance law expiring this month, that, without needed reforms, could drain the limited resources startup founders depend on, erode user trust online, and further complicate the already fractured digital trade landscape, as we explain in a new blog post this week.The law, Section 702 of the Foreign Intelligence Surveillance Act, is the U.S. government’s primary authority to compel American companies to hand over foreign communications without an individualized warrant. It has long threatened transatlantic data flows, creating uncertainty for startups that rely on moving data between the U.S. and Europe.
Engine opposes proposed drastic expansion of California antitrust law. Engine sent a letter to California lawmakers this week opposing AB 1776, warning the proposal to dramatically expand the state’s antitrust law would create significant legal uncertainty for businesses. The bill could expose startups to abusive litigation and discourage acquisitions that comprise the overwhelming number of startup exits, which ultimately help cycle talent and capital back into local ecosystems.
USTR underscores digital trade barriers in annual report. The U.S. Trade Representative released the National Trade Estimate report this week, outlining foreign trade barriers facing U.S. companies. Notably, the updated report underscores how digital trade barriers—from discriminatory regulations to restrictions on cross-border data flows—can create significant hurdles for startups trying to compete in global markets.
Supreme Court weighs birthright citizenship order. The Supreme Court signaled skepticism this week toward President Trump’s executive order seeking to restrict birthright citizenship, with justices questioning the administration’s legal reasoning during oral argument. Rather than trying to remake the country’s legal framework to further restrict who can be a U.S. citizen, policymakers should expand pathways for people to come to or stay in the country, which would boost the economy and innovation ecosystem.
Startup Roundup:
#StartupsEverywhere: Austin, Texas.Throne Science, based in Austin, Texas, is bringing data-driven insights to an essential part of our daily routine. Co-founder Scott Hickle is utilizing his background in engineering and software product management, along with leveraging AI, to build a device that could change how people perceive gut health. We sat down with Scott to discuss his journey in founding Throne, the role of AI, the impact of tariffs on innovation, and how he has thought about navigating Food and Drug Administration (FDA) regulations.