The geopolitical dynamics of 2025 turn everything into a trade issue, including digital competition policy. In February 2025, the United States government outlined the types of foreign digital policies it deems to discriminate against American companies and its plans to counter them. Since then, digital policy has become a recurring subject of tariff negotiations, including rules governing competition in digital markets. This briefing outlines how digital policy causes geopolitical tensions and how governments navigate tensions in digital competition.

In 2025, trade negotiations have captured the global centre of attention. Governments worldwide are shifting from industrial to trade policy: Trade barriers are replacing subsidies, financial commitments to subsidies are decreasing, and the policy motives for subsidies are shifting towards boosting strategic competitiveness and security. The United States government has dominated headlines by repeatedly threatening “retaliatory” tariffs on a wide range of trading partners and demanding a flurry of concessions for reduced tariff rates.

A core demand by the United States government is the removal of digital policies that affect American firms. The Memorandum on “Defending American Companies and Innovators From Overseas Extortion and Unfair Fines and Penalties” outlines the government’s perspective that certain foreign digital policies discriminate against American firms. It tasks several government authorities to analyse foreign regimes and prepare a response, including tariffs. The Memorandum explicitly mentions rules regarding the taxation of the digital economy, the regulation on online content, the cross-border flow of data, and the promotion of local content, among others.

Digital competition rules are on the United States government’s radar. When the White House issued the Memorandum, the fact sheet explicitly mentioned the European Union’s Digital Markets Act. While the Memorandum itself did not emphasise digital competition rules, it scrutinised threshold-based obligations and fines issued in enforcement cases. Thresholds are common in digital competition regimes: The European Union’s Digital Markets Act, the United Kingdom’s Digital Markets, Competition and Consumers Act, and Japan’s Mobile Software Competition Act all set base obligations on thresholds, such as revenues and average users. Substantial fines for violations are also common in digital competition regimes. The Italian Competition Authority, for instance, fined Amazon EUR 1.1 billion for abusing its market dominance by favouring third-party sellers that used Amazon's logistical services in the Amazon “buy box”. And the European Commission fined Google EUR 4.1 billion for abusing its market power in the search engine market.

Digital policy becoming a bargaining chip in trade negotiations is a reality, not a risk. Canada rescinded its Digital Services Tax to advance tariff negotiations with the US, briefly before its entry into force. The United States’ Commerce Secretary reportedly stated that the sale of TikTok is an “unofficial” part of current trade negotiations with China. The White House's announcement of additional 40% tariffs on Brazil, issued on 30 July 2025, references rules on content moderation and data. The United States Trade Representative’s investigation into Brazil, under Section 301 of the Trade Act, explicitly scrutinises online content rules. The United States also issued visa restrictions on Brazilian judicial officials who had enforced these rules. The range of digital policies that land on the negotiating table, and the potential consequences for governments and officials, are thus both broad.

The focus of tensions regarding digital competition has been the European Union’s Digital Markets Act. European Union officials repeatedly emphasised the fairness and proportionally of the Act, to reduce tensions, but noted that the regime would not be rescinded and enforcement would not be reduced or delayed. In March 2025, the European Commission fined Apple EUR 500 million and Meta EUR 200 million for violations of the Digital Markets Act regarding App Store rules and the “pay or consent” model, respectively. The United States government responded by labeling the fines a novel form of “economic extortion” that would not be tolerated, but did not retaliate (to date).

Recently, the Republic of Korea’s proposed digital competition rules have gathered attention. In June 2025, several members of Congress issued a letter to the United States Trade Representative, Treasury Secretary, and Commerce Secretary, demanding pushback against legislative proposals advanced by the Korea Fair Trade Commission. The letter stated that it would disproportionately target American digital companies, mirroring the European Union’s “blatantly discriminatory” Digital Markets Act. In addition, the US-Republic of Korea Digital Trade Enforcement Bill was re-introduced to Congress, aiming to authorise trade restrictions as a reaction to discriminatory digital competition rules. Notably, this pushback occurs against legislative proposals, rather than adopted rules.

As geopolitical tensions are poised to rise, policymakers face an additional layer of complexity. Governments find themselves between a rock and a hard place when deciding whether to give in to or resist US demands. Governments that remove digital competition rules may well face a backlash from local companies. In turn, governments that maintain their digital competition rules despite the threat of “retaliation” may draw the ire of local providers affected by tariffs.

Tariff negotiations between India and the United States are still underway at the time of writing, the most recent stand being a 25% tariff threat on imports from India. The possibility of demands to remove certain digital policies is elevated, in view of other negotiations. Based on the Digital Policy Alert’s analysis of geopolitical tensions in digital policy and tracking of India’s digital policy, the following policies could become subject of negotiation. 

The United States government has strongly pushed back against rules governing online content. This could draw attention to India’s Information Technology Rules and their enforcement. A less strong form of pushback has emerged regarding rules limiting cross-border data flows. India’s novel data transfer regime under the Digital Personal Data Protection Act could thus become subject of negotiations, as well as sectoral data localisation mandates.

The tensions regarding the Republic of Korea’s digital competition proposals showcase that not only adopted rules are subject to negotiations. Accordingly, India’s planned Digital Competition Bill could cause pushback from the United States government. Another – less clear – point of tensions could be Digital Public Infrastructure. The United States’ investigation into Brazil is reportedly covering its instant payment system Pix. Depending on the outcome of the investigation, it could draw attention to India’s groundbreaking Digital Public Infrastructure.

Finally, the United States Trade Representative’s National Trade Estimates report for 2025 provides a comprehensive view on the policies deemed to be detrimental to American companies. Notably, the report mentions India’s equalization levy – this policy would have caused significant tensions but its rescission was announced earlier this year.