Digital services such as cloud storage, enterprise software, financial services, and media streaming are increasingly caught in the crosshairs of global trade tensions, according to a new report from Boston Consulting Group (BCG). While global attention often centers on tariffs on physical goods, trade in services is undergoing a quieter yet equally consequential transformation.
These are among the findings of BCG’s latest report, “Services Are the New Fault Lines in Global Trade,” released today. The report projects that the value of global services trade will grow by 5.6% annually through 2032, more than double the rate for goods, reaching $11.7 trillion. As services gain economic prominence, particularly in advanced economies, their exposure to policy-driven disruptions is growing.
“Services, especially digital services, have become crucial for the global economy and therefore we expect significant geopolitical activity,” said Aparna Bharadwaj, a managing director and senior partner at BCG and the global leader of the firm’s Global Advantage Practice. “Many digital services are dual use, including defense applications. Several are significant employers of highly paid white-collar workforces. Countries are increasingly using regulation, taxation, and trade restrictions to assert control over these platforms. This means services businesses need to rapidly develop geopolitical muscle and resilience.”
Services are a cornerstone of the global economy: Services account for anywhere from 40% to 70% of GDP in most nations, and 50% of global employment on average. The US leads the global services market with close to $3 trillion in annual sales, while the UK, India, and Ireland are all major services hubs.
The report outlines how digital services have become central to geopolitical competition. Services are highly exposed to non-tariff trade measures, with governments enforcing data localisation rules, export controls, and targeted platform bans. The result is a fragmented digital landscape, with companies required to maintain region-specific IT systems, compliance protocols, and business models.
This fragmentation is already impacting companies on both sides of the trade divide. Nations like the US, UK, India, and Ireland have emerged as leaders in services exports, collectively accounting for trillions in trade surpluses. But that leadership also makes them vulnerable to retaliation in policy disputes.
“The new front line of global trade isn’t just in ports or shipping lanes – it’s in data flows, cloud systems, and AI algorithms,” said Cristian Rodriguez-Chiffelle, partner and director at BCG and co-author of the report. “Governments are using trade measures to regulate services in ways once reserved for goods: rather than tariffs, barriers now take the form of data restrictions, licensing rules, and market access limitations. For companies and countries alike, the question is no longer just about efficiency – it’s about how services underpin strategic competitiveness in global trade.” To cope with any changes, the report recommends a three-pronged strategy for companies: anticipate regulatory shifts, cushion financial exposure through flexible models, and transform their global operations to enable market-specific agility.
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