On one side are EU regulations. On the other side, US tariffs. Where should big tech land?
The last few years have been anything but comfortable for big tech firms. Regulators and legislators around the world are increasingly breathing down the necks of big tech executives, trying to gain revenge for the chaos caused by years of inaction and lax regulation. For the executives, it can seem as if they spend almost as much time in front of Congressional or governmental hearings as they do running their own countries.
And that was before the election of Donald Trump and the economic rollercoaster that has ensued. Trump has brought the global economy to its knees thanks to a misguided attempt to levy tariffs on countries worldwide, targeting in particular China, which the US sees as a major competitor.
It leaves executives, already battered and bruised, wondering where to turn next. They’re caught between two big fires, with no good choices to make. But which way should they turn?
Towards the United States
The most present and pressing danger for tech companies is their bottom line – and that’s threatened significantly by Donald Trump’s tariff-based actions. Apple has announced it intends to drastically redraw its supply chains, shifting all its iPhone production destined for the United States to India by next year in order to avoid the risk of eye-watering tariffs slapped on goods emanating from China by the United States.
While the 145% tariffs targeting the tech sector in China have since been rolled back, with a president as unpredictable as Donald Trump, it’s never certain whether or when they’ll be reinstigated. This means it makes good business sense to decouple from China for the time being.
Other companies are doing much the same: Google is debating whether to move its production to India – this time from Vietnam – in order to dodge similarly high tariffs on Vietnam, while Intel is considering cutting jobs and paring back investment in recognition of the new economic reality.
But those shifts towards placating the US aren’t the only pressure that companies are facing right now. Europe is also on the warpath when it comes to wreaking revenge on tech firms. And they need to respond.
Towards Europe
Europe has spent years meticulously drafting legislation designed to bring big tech to heel after what it sees as years of runaway growth that has led to serious societal harm. So a slew of packages of regulations on everything from tech to the digital markets they operate in, to the new buzzword of AI, are being passed and enforced with huge consequences.
The EU’s AI Act has been criticized by the likes of Meta for stymying growth and innovation in the nascent space, stopping development before it begins. At the same time, Europe is taking aim at social networks in order to try and stop harmful but legal content from flourishing on the platforms.
US companies have reacted with horror at the idea of self-censorship. And the decisions by European regulators are starting to occur: Apple and Google have been found in breach of the EU’s Digital Markets Act in recent weeks.
A rock and a hard place
The natural reaction would be to try and bow to both masters and make compromises. But the challenge is that it can compromise companies’ security and digital capabilities. The risk of shifting trusted, and well-practiced supply chains to new areas is obvious: without the expertise and experience of making products at scale, there’s always the potential of substandard products rolling off production lines, harming companies like Apple’s reputation.
Countries like India and Vietnam have production prowess, but it’s not just the ability to build products well that firms need to worry about. Security processes are significant when making something as ubiquitous as smartphones, and the risk with any change is that it opens up weaknesses that can be exploited.
Things aren’t much better for tech companies in Europe, either. An attempt to bring about a weaker regulatory regime in response to regulators’ actions could harm consumers, leading to supply chain vulnerabilities, and give breathing room for state-sponsored threats to fill the vacuum. Big tech is currently being challenged like never before, and has to find an accommodating place to sit.
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