Applicability of the Trump Administration’s Reciprocal Tariff Executive Order on Software and Digital Exports

On April 2, 2025, President Trump issued an executive order (Executive Order 14257¹) to implement “reciprocal tariffs” on United States trading partners (the “EO”). Although the Trump administration subsequently paused the implementation of the reciprocal tariffs outlined in the EO for 90 days, President Trump’s EO raises a number of questions regarding how the proposed tariffs will impact technology companies and in particular, whether the tariffs could apply to software or ex-U.S. digital exports (e.g., software or code developed in one country, hosted in another and delivered to a third). In this Q&A, we summarize the key takeaways that technology companies, and their investors and sponsors, should know about how the proposed tariffs could impact software and digital exports. Although the applicability and timing of the tariffs remains uncertain, we conclude that as of now, software in a tangible form (e.g., software on a CD included in a box) would generally be considered a “good” subject to the proposed tariffs, but software in an intangible form (e.g., provided on a service or hosted basis) will likely be exempt from the EO under World Trade Organization (“WTO”) trade rules.

What is a tariff?

As a general matter, tariffs are taxes levied on imports of goods. Tariffs increase the duty rate that must be paid on an imported good, which is calculated as a percentage of the value of the good. When determining the applicability of a tariff, the key question is whether a particular transaction involves an import of a good from a jurisdiction where duties need to be paid. If so, for purposes of calculating the duty rate, the transacting parties must assess (1) what the country of origin is for the imported good and (2) what the Harmonized Tariff Schedule classification² is with respect to such country.

Would the tariffs proposed to be implemented through the EO apply to software or other digital assets made available as “software as a service” or hosted on a cloud?

Generally, no. The EO as drafted proposed reciprocal tariffs on goods delineated in an Annex II to the EO, which notably does not identify intangible software or digital assets.³ Additionally, since 1998, the United States, as part of the WTO, has agreed to a moratorium on imposing customs duties on electronic transmissions. WTO members have biannually renewed and confirmed the moratorium, and the current decision of the WTO extends through March 2026.^4,5 However, the current moratorium does not set forth a formal definition of “electronic transmissions,” and the term remains undefined in the context of international trade rules.⁶ Further, if the WTO elects not to renew the moratorium in 2026 (such as due to the recent tariff escalation), companies would have to refer to a patchwork of regional and bilateral trade agreements to assess whether electronic transmissions are exempt from duties.⁷

Is tangible software (e.g., software on a disc shipped in a box) subject to the EO tariffs, or does such software fall under the recent exceptions to the tariffs for electronics?

Software that is imported in a tangible form, such as on a disc, is subject to the tariffs because the disc itself is considered a good. Such tangible software is not covered by an exception to the tariffs. On April 11, 2025, President Trump released a presidential memorandum with a list of exceptions to the reciprocal tariffs imposed under the EO, which included an exception for “semiconductors.”⁸ Additionally, the United States Customs and Border Protection released updated guidance on April 11, 2025 that published the list of excluded product classifications under the Harmonized Tariff Schedule of the United States.⁹ The published exceptions, which are retroactively effective to April 5, 2025, include smartphones, solid-state storage devices, flat panel display modules, monitors, and some semiconductors, but do not exclude software in a tangible form.¹⁰ Thus, we expect the import of tangible software (and any electronics that are not specifically exempted) to remain subject to the reciprocal tariffs.

What should technology companies do to mitigate any risks at this time?

Below are some best practices that technology companies should consider in connection with cross-border transactions involving software and digital assets:

• Structure cross-border deals to avoid any importation of tangible software. This will help to avoid classification of the software as an import subject to tariffs.
• Keep abreast of future developments in trade law. With trade law quickly evolving, it will be incumbent on companies to closely monitor trade law developments. Given that the United States is an exporter of services, it will be important to monitor whether any other country will seek to impose a reciprocal duty on the United States – but one based on the import of services such as software. In addition, parties should stay updated on the WTO’s 14th Ministerial Conference in March 2026 to ensure that countries agree to continue their practice of not imposing customs duties on electronic transmissions.
• Identify a tariff expert if needed. To the extent that the law changes or a tariff may apply, companies should seek out the advice of a tariff expert. Given the high demands placed on tariff experts as of late, it may take time to identify an expert who may be available to advise: sufficient lead time for engagement and delivery of advice should be factored into planning.