Big Story: Trade policy should reduce barriers, not invite new ones
Trade tensions continue to escalate under the current administration, with new—and quick—changing policies fueling uncertainty for businesses of all sizes, including startups. Trade challenges increase costs, create market uncertainty, and threaten U.S. startups’ ability to scale globally. In comments filed last week, Engine urged policymakers to advance a startup-focused trade agenda that constructively addresses trade barriers—rather than creating or inviting new ones.
As we outline in our comments, a wide range of trade barriers across many jurisdictions undermine U.S. startups' global competitiveness. Aggressive, imprecise U.S. trade measures can provoke foreign governments to retaliate with new barriers, limiting opportunities for startups to grow and compete in key global markets. Retaliatory tariffs, regulatory fragmentation, and digital trade barriers—including data localization requirements, digital services taxes (DSTs), and cross-border data restrictions—restrict startups ability to grow globally and keep up with their competitors. China’s export restrictions on minerals critical to AI and semiconductor production, Canada’s DSTs raise costs for U.S. startups, and EU digital sovereignty policies that favor domestic firms over U.S. companies all create new barriers that limit U.S. innovation. Rather than inviting additional trade restrictions, U.S. policymakers should work cooperatively with trading partners to lower these barriers and ensure startups can compete. As Olivia Walch, CEO of Arcascope, testified before Congress last year, imploring policymakers to help U.S. startups “do what we do best—build—and compete on a global stage.”
Startup founders have consistently reminded U.S. policymakers that their success in global markets depends on balanced and stable trade policies. Last year, dozens of founders signed an open letter urging lawmakers to reassert U.S. leadership on digital trade. Policymakers should avoid trade policies that invite retaliation and limit market access for all businesses and focus on a positive trade agenda that supports digital trade solutions that remove barriers for startups.
Policy Roundup:
Tech groups warn against cuts to key tech agency. A coalition of tech organizations sent a letter to the U.S. Secretary of Commerce Howard Lutnick, cautioning that downsizing the National Institute of Standards and Technology (NIST)—a key agency for developing U.S.-led AI standards— “will have ramifications” for the country’s ability to sustain AI innovation. The letter follows the release of more than 70 NIST employees in early March as part of the administration’s broader efforts to restructure the federal government.
Maryland policymakers weigh new tax on advertising and other services. Last week, businesses warned Maryland lawmakers that legislation to implement a 2.5 percent sales tax on a wide range of business-to-business services, including tax and IT services, would wreak havoc on the state’s business community. As Engine and a coalition of industry groups told lawmakers, startups—like many businesses—would face higher costs to access essential services they need to operate and would drive both companies and investment out of state.
Why the Internet still needs Section 230. In a Verge op-ed last week, Sen. Ron Wyden (D-Ore.) wrote that Section 230 is a critical legal framework that enables internet platforms of all sizes—especially startups—to host content and build online communities. He argued that its protections are as essential today as when he co-authored the law nearly 30 years ago. Wyden warned that dismantling these protections—amid renewed challenges from the Trump administration—would make it nearly impossible for new platforms to emerge, particularly startups that host user-generated content and don’t have the funding to fight costly, drawn-out legal battles.
SBA unveils plan to cut regulations. Small Business Administrator Kelly Loeffler announced a new “red tape hotline” for businesses to report excessive or outdated regulations. Last week, SBA officials traveled through the Midwest to gather input on which regulations should be revised or eliminated. The hotline is part of a broader effort to streamline $100 billion in regulations affecting small businesses.
House hearing laments patchwork of cyber rules. Last Tuesday, a House Homeland Security subcommittee hearing dove into the patchwork of cyber incident reporting rules that create costly, confusing, and complex compliance burdens for companies of all sizes, especially startups. As Engine has previously testified, the patchwork of varying—or sometimes conflicting—rules complicates incident response, worsens the already-devastating impact of a cyberattack, and should be made uniform through federal action.
Startup Roundup:
#StartupsEverywhere: Rochester, N.Y. Cooley Comics LLC is a creative startup blending AI with storytelling to allow underrepresented voices to tell their own stories. From creating characters to teaching AI ethics, Cooley Comics is shaping the future of storytelling. We recently met CEO and co-founder Chris Cooley to discuss AI, copyright issues, and more.
