The Big Story: Amid trade pronouncements, startups look for digital trade details
This week saw a flurry of trade activity from the Trump administration, though many of the details on digital trade—and the impact on startups—remain to be seen. Ahead of the delayed August 1 implementation of President Donald Trump’s “Liberation Day” tariffs—which were announced in April using a national emergency authority and adjusted hours before the deadline—the U.S. has announced aggressive tariffs against some countries and high-level agreements with others that largely favor the U.S. but skirt some of the key specifics.
In the days leading up to the August 1 deadline, Trump rolled out a framework trade deal with the European Union and an agreement with South Korea. The administration claimed victory with both announcements, pointing to the 15 percent tariffs on imports from Europe and South Korea and the countries’ pledges to invest hundreds of billions of dollars in the U.S. Those announcements followed ones from earlier this summer that the United Kingdom, Vietnam, Indonesia, the Phillipines, and Japan have all reached trade agreements with the U.S. While those trade deals are being held up by the administration as wins, many lack details and only agree to, in the future, address key digital trade issues impacting startups, like foreign countries’ digital service taxes and data localization requirements.
And deals with some trading partners have proved elusive, despite months of negotiations; Trump announced this week 50 percent tariffs on most Brazilian exports and 25 percent tariffs on India, increased tariffs on Canada, and U.S. and Chinese officials said they would try to extend their tariff truce, which is set to expire in mid-August. Pending court challenges are casting further uncertainty over the success of Trump’s trade shakeup. This week, judges at the Court of Appeals for the Federal Circuit seemed skeptical during oral arguments in a case challenging Trump’s use of the national emergency authority to issue the sweeping tariff hikes.
The majority of the focus has been on how tariff threats and trade negotiations will impact the cost of physical goods that cross countries’ borders, but strained and unstable relationships with key trading partners—including those who are unhappy about the frameworks they agreed to under threat of higher tariffs—will have wide reaching consequences for all companies that look to do business abroad. In a new report this week, Engine spells out the implications of this trade roller coaster for startups. That includes not only the risk of higher equipment costs as a direct result of tariffs, but also the many risks that foreign countries will respond to aggressive and shifting tariff threats by crafting policies across a wide range of issues that make it harder for U.S. companies to enter those markets. As U.S. policymakers continue with Trump’s trade agenda, it’s critical they pursue a stable, fair digital trade environment that allows startups to plan for global growth.
Policy Roundup:
Senate panel debates regulatory sandbox for AI in fintech. At a hearing this week, the Senate Banking Committee discussed the role of AI in the highly regulated industries of capital markets and insurance. One proposal—the bipartisan and recently reintroduced Unleashing AI Innovation in Financial Services Act—would create regulatory “sandboxes” for startups to build and test AI applications alongside regulators. If passed, the bill could offer a smoother, faster pathway to innovation by mitigating high compliance costs that prevent startups from successfully bringing innovations to market.
Senators hear about the need for federal privacy framework. At a hearing this week held by the Senate Judiciary subcommittee on privacy, technology, and the law, witnesses and lawmakers discussed the need for a federal privacy framework and the growing patchwork of state laws. Startups have long called for a federal privacy law that preempts state laws, because the patchwork can lead to tens of thousands of dollars in redundant compliance costs as new laws come into force.
Trump administration weighs a patent tax. Commerce Department officials are considering having the Patent and Trademark Office (PTO) charge patent holders a new fee worth between 1 and 5 percent of the value of their patent, according to the Wall Street Journal. If pursued, this would require the PTO to determine the value of each patent and would be a major change from the current system, where patent applicants pay a flat fee to the PTO—which, combined with long wait times and high associated legal costs, already makes the patent system difficult for many startups to navigate. Despite new cuts adding to those already-long wait times, the PTO is entirely self-funded through existing fees, and a new patent tax would be part of a larger plan to narrow the federal government’s deficit.
UK online safety law stifles speech in its first week. In the days since taking effect last Friday, the United Kingdom’s Online Safety Act has pushed U.S. Internet platforms to limit access to certain types of user content for users located in the UK. The law is aimed at protecting young users from “harmful” content—including content that would receive First Amendment protections in the U.S.—but has seen platforms disable access to more content than regulators originally envisioned out of an abundance of caution, including by requiring users to verify their ages.
NY court says social media sites aren’t liable for user content. A New York state appeals court ruled late last week that Internet websites can’t be held legally liable when users commit violent acts after interacting with racist user content. The plaintiffs in the case—which centered around the 2022 horrific and racially motivated shooting in Buffalo, N.Y.—argued that social media platforms are defectively designed and surfaced the incendiary user content for the shooter, but the court said social media platforms (and their ability to sort and display user content) is protected by both the First Amendment and Section 230.
Startup Roundup:
#StartupsEverywhere: San Francisco, California. At only 17, Adrian Martinez is looking to make learning more fun. His AI-powered software, Infinilearn, is a gamified personal learning app designed for homeschooled kids and teens like himself. We sat down with Adrian to discuss his app, his use of open-source AI models, the help he’s received along the way, and more.
