The most obvious price increase of tariffs happens on physical products. However, one of the less understood aspects of tariffs is how they both directly and indirectly affect the prices of digital goods, such as video games and streaming service subscriptions like Netflix and Disney+.
It’s Not That Easy
Digital goods are actually not subject to tariffs, as tariffs only affect physical products as defined by international trade law. Many digital products, such as music and video games, are unaffected by tariffs. However, due to how digital goods still involve the usage of physical goods in some way, any digital products are indirectly subject to the price increases of tariffs. There are a surprising number of factors in play that can impact the costs a consumer pays for anything digital.
Streaming Taxes
For streaming services, tariffs potentially have a clear, indirect impact on the production of new shows to keep you entertained. When tariffs impact the cost of everyday goods, such as groceries, or construction material, the butterfly effect of the tariffs can be seen in the costs of film production when looking carefully. As the costs of food or construction material increases, the cost of keeping actors on set also increases, even if only slightly. With tariffs, it can become ever so slightly difficult for companies to operate at the levels of profit they usually see without raising the prices of their subscriptions, which many already do without this incentive.
Selling Pickaxes To Gold Miners
Tariffs that raise the prices of essential tech for computers can actually raise the cost of some digital services, if items that are key to maintaining server infrastructure and creating devices that are used for obtaining digital products, such as video game consoles or video game cartridges, then the prices of these products are indirectly increased as the means to purchase them have their prices directly increased. When physical copies of video games become more expensive due to additional tariff fees, this may lead to a game company also increasing the price of the digital-only version as well to maintain a profit margin.
Getting Physical
When tariffs increase the price of physical goods, adverts for them become less effective as the prices for those goods go higher, and the average consumer is less incentivized to spend on those items, whether by in-person shopping or by ordering online. While these aren’t digital goods per say, the additional fees and costs associated with buying from an online ordering service are also impacted indirectly by tariffs on physical products. As an example, if the costs of materials used to maintain the server infrastructure of Doordash’s servers rise significantly, then it becomes fairly likely that the average unnamed fees when ordering food will rise.
Non-Consensual Cost-Cutting
Smaller businesses that are now quite prominent from gaining fame and notoriety from platforms such as TikTok and Instagram may run into issues when ordering supplies and shipping their products if their supplier country is locked in a trade war. These smaller businesses may rely on digital services to ship their goods as well, which are already negatively affected by tariffs. Since tariffs can drastically raise the costs of raw goods and normally cheap items for dropshipping, tariffs may shut down these small businesses who are unable to keep up with impossible costs from increased shipping and item costs, denying possible customers from purchasing their desired items online with escalating fees from online shopping platforms and other products.
And It Still Comes Around
Even creators who make a living distributing non-physical products to paying customers over sites such as Patreon might find tariffs to impact their livelihood enough that they may start raising prices of their subscriptions out of necessity. If the cost of key items to live is too expensive, then these independent creators may seek to raise the prices of their products as a knock-on effect of tariffs.
Article Invoice (+fees)
To conclude, while tariffs don’t typically have immediate direct impacts on digital goods, the impacts of anything purchased online can be felt clearly when purchasing products that are not typically directly affected by tariffs. Physical products bought online have additional fees directly applied to them, while any immaterial goods are only affected later down the line, usually as a direct cost of physical goods being tariffed. As such, one should always bear in mind that even digital goods are affected by tariffs, even if it does not seem like so.
