Today, the US stands at the forefront of the digital economy, while many other nations are still focused on manufacturing. Yet, instead of reinforcing this forward momentum, the current policy approach represents a shift backwardsSince his first presidential run in 2016, Donald Trump has championed a shift toward economic insularity. While his first term was marked by a protectionist agenda, he has taken it to new heights since returning to office on January 20 by making tariffs, trade wars, and nationalist rhetoric central to Washington’s economic playbook.The president and his advisors frame his America First trade policy as measures to protect American industry and jobs. This is a strategic miscalculation. America is fighting yesterday’s battles while ignoring its most powerful current economic asset — its dominance in the global services economy.
Historically, the US has always stayed ahead of the global economic curve. It led the world into industrialisation in the second half of the 20th century while much of the globe remained agrarian.
Today, it stands at the forefront of the digital economy, while many other nations are still focused on manufacturing. Yet, instead of reinforcing this forward momentum, the current policy approach represents a shift backwards. Such a shift could isolate the US from its competitive advantage in a rapidly globalising services sector.
Consider the numbers: According to the Bureau of Economic Analysis, in 2023, the US exported $1.03 trillion in services and imported $748.2 billion, resulting in a substantial trade surplus. The country accounted for 12.5% of global service exports, far surpassing any other nation.
These numbers make it apparent that even at its current trade deficit overall continues to attract political ire, the US runs a massive trade surplus in services. The US has a clear and sustained lead in areas like finance, cloud computing, higher education, consulting, entertainment, and emerging sectors such as AI and software-as-a-service (SaaS).At the heart of this dominance in services are the so-called “Magnificent 7” companies: Apple, Amazon, Microsoft, Alphabet, Meta, Nvidia, and Tesla. The seven tech giants had a combined market cap of $17.6 trillion at the end of last year, four-and-a-half times the size of India’s GDP.
These companies are not just tech titans. They are modern trade powerhouses, generating enormous international revenue through digital infrastructure, Artificial Intelligence (AI) platforms, cloud services, autonomous systems, and global logistics. These firms thrive not in closed economies, but in open, connected markets. Trade barriers would only limit their reach and reduce the competitive edge the US currently enjoys.
Yet, the Trump administration seems determined to apply an outdated industrial-age playbook to a 21st-century digital economy. The consequences of such protectionism are already becoming clear. While smaller economies have occasionally made concessions under pressure, larger trading partners are increasingly pushing back.
Canada, Mexico, and the European Union, historically among America’s closest allies, have signalled frustration with Washington’s tariff-first approach and may soon turn toward each other and other partnerships if tensions escalate further.
Strategic alignments in Asia are shifting in real time. Just last week, the foreign ministers of China, Japan, and South Korea, three countries that once sat uneasily in the same room, met in Tokyo to signal deepening regional cooperation. “Our three nations have a combined population of nearly 1.6 billion and an economic output exceeding $24 trillion. With our vast markets and great potential, we can exert significant influence,” Chinese foreign minister Wang Yi said after their meeting.
While the US economy remains the largest in the world at around $30 trillion, the formation of alternative trade alliances could undercut America’s economic leverage.
If these trends continue, the fallout won’t just be geopolitical. America’s thriving services ecosystem, which relies on seamless digital trade, open standards, and regulatory cooperation, will be the first casualty. Tariffs and isolationism won’t protect this sector. They’ll undermine its growth and global reach. For instance, India is the largest market for Facebook, with nearly 380 million users, more than the entire population of the US. WhatsApp, another Meta-owned platform, has over 538 million users in the country.
