Trump’s new tariffs are shaking up global trade — but the impact won’t stop at physical goods.
In the latest twist, the former president has granted a 90-day pause on tariffs for many trading partners, dialing duties back to a 10% baseline. But not for China. A steep 125% tariff has just been enforced effective immediately, escalating tensions in an already fraught U.S.-China trade relationship.
While headlines have focused on the implications for steel, manufactured goods, and the stock market, there’s a quieter — but equally significant — story unfolding: the ripple effects on global trade in services.
As nations brace for rising costs, disrupted supply chains, and tit-for-tat measures, the service economy — from cloud computing to digital marketing to food delivery — could be caught in the crossfire. In this piece, we unpack what tariffs on goods could mean for the services sector globally.
What Are Trade in Services and Why Does It Matter?
Trade in services refers to the sale and delivery of intangible products such as consulting, education, banking, insurance, IT, cloud services, and digital advertising. Unlike physical goods, these aren’t shipped in containers — but they are a vital part of the global economy.
In 2023, global exports of commercial services reached $7.3 trillion, representing nearly a quarter of total world trade. Leading service exporters include the U.S., the EU, the UK, China, and India.
The U.S. in particular is a powerhouse: it exported $1.1 trillion in services last year and recorded a $295 billion trade surplus in services — one of its few trade strongholds amid a $1.2 trillion deficit in goods. America is a world leader in areas like cloud computing, financial services, education, software, and logistics.
Other major exporters of services include the EU (with $1.7 trillion in services exports), India (a tech and outsourcing hub), and China, whose services sector — including tourism and e-commerce platforms — is growing rapidly.
So while tariffs don’t directly apply to services, their indirect impact can be far-reaching.
Services Aren’t Tariffed — But They’re Still at Risk
Tariffs target goods, not services — but in practice, the two are tightly intertwined. In March 2025, the U.S. service sector posted its slowest growth since June 2024, according to the Institute for Supply Management. Analysts point to rising uncertainty, declining consumer demand, and fears of broader economic contagion from the new tariff regime.
Consider digital advertising. When the cost of goods rises — say, smartphones or sneakers — consumers buy less. This prompts companies to cut back on advertising budgets, especially performance-based campaigns. Analysts warn this could impact revenues for global giants like Meta and Google.
“If you cannibalise 10 to 15% of demand, that could cut digital advertising spend significantly,” says Wedbush tech analyst Dan Ives. For digital ad agencies, marketers, and freelancers — this means fewer contracts and tighter margins.
Then there’s food service. While restaurants may substitute ingredients — swapping imported cheese for domestic alternatives — rising input costs lead to higher menu prices. As prices climb, consumer demand falls. And with thinner profit margins, platforms like Uber Eats, Deliveroo and DoorDash may raise fees or reduce delivery zones, disrupting the gig economy and reducing service volumes.
This domino effect cascades across economies: higher prices → lower demand → hiring freezes → retrenchments. In highly service-driven economies like the UK, Australia, and much of Southeast Asia, the effects could be pronounced.
Global Supply Chains for Services Will Be Disrupted Too
Services also rely on goods — particularly hardware, devices, and infrastructure.
A cloud computing provider in Singapore depends on servers assembled in China. A German fintech firm may use semiconductors sourced from Taiwan or Korea. As input costs rise due to tariffs or supply chain bottlenecks, the cost of delivering those services increases.
This can erode competitiveness, especially for small and medium-sized service providers that don’t have the same buffers as multinationals. Many may pass these costs on to consumers — or cut corners elsewhere.
Further, the move to onshore manufacturing may not translate seamlessly to onshore service expansion. Companies could instead diversify their operations — shifting data centres, call centres, and engineering teams to tariff-neutral regions like Vietnam, Mexico, or the UAE.
Could Retaliation Threaten Global Services Trade?
Another risk is retaliatory measures. While services aren’t tariffed at the border, governments may respond with regulatory hurdles, investment restrictions, or data localisation rules that make it harder for U.S. firms to operate abroad.
China has previously responded to tariffs by limiting access to sectors like entertainment, education, and tech. If tensions continue to escalate, U.S. service firms — from universities to consultants to software vendors — could find their global operations constrained.
Moreover, emerging economies may take this opportunity to fill the void. Indian IT firms, for instance, could pick up outsourcing contracts as U.S.-China tensions push companies to look elsewhere for stable partners.
Conclusion: Preparing for a Tighter, More Complex Services Trade Landscape
While tariffs are directed at goods, the global services economy is anything but insulated.
The Liberation Day Tariffs may be the latest chapter in the U.S.-China trade saga, but their ripple effects stretch far beyond factories and shipping lanes. Services — once seen as “immune” to trade wars — are now vulnerable to cost pressures, strategic realignments, and geopolitical fallout.
As global markets digest these shifts, businesses in the services sector must stay agile:
- Diversify operational footprints.
- Monitor policy shifts closely.
- Build contingency plans for both short-term demand shocks and long-term structural changes.
The global economy is becoming more interlinked — and as this episode shows, even policies that seem narrowly focused can send waves through the entire system. If these shifts are creating uncertainty for your business, our team can help unpack what they mean and explore strategic responses. Have questions or want to explore your next steps? Book an Export-Ready Call with our team today.
