[Ingyo Jeong's Trade-Off] U.S. Pressures for Borderless Platforms... China Builds a 'Digital Great Firewall'

The Future ‘Data Sovereignty War’ Overshadowed by Security Issues

Precarious U.S.-EU Compromise—Direct Confrontation With China

Physical Supply Chain Crisis...Fierce Territorial Battle Beneath the Surface

Korea Needs a Proactive Strategy and Global Digital Allies

Artificial intelligence (AI) technology is a powerful driver that facilitates global trade, but at the same time, it is creating new trade issues by raising concerns such as data transfer restrictions, platform regulations, AI ethics, and intellectual property rights.

On October 30 last year, U.S. President Donald Trump and Chinese President Xi Jinping were seen leaving the summit venue while talking after concluding the U.S.-China summit at Naramaru within the Busan Air Force 5th Air Mobility Wing. Photo by Yonhap News

Experts analyze the correlation between AI and data in three main ways. First, AI dramatically enhances overall trade efficiency by breaking down language barriers, automating logistics, forecasting demand, and enabling automated customer response. Second, in the era of AI, 'data borders'—such as cross-border data transfer restrictions, data localization requirements, and limits on offshore cloud usage—effectively function as new trade barriers. Third, as digital trade evolves into a battleground for economic security and regulatory dominance, countries are deploying AI legislation, personal data protection, cybersecurity, and platform regulations to safeguard their industries and take the lead in shaping market order.

A Digital Territorial War With No Smell of Gunpowder

Currently, global attention is focused on the sounds of gunfire from the war in Ukraine and conflicts in the Middle East, and the resulting physical supply chain crises. However, beneath the surface, a fierce territorial war over digital data is underway—one that will determine future hegemony. In the past, territory meant land and sea; in today’s AI era, 'personal behavioral data, industrial data, and algorithms' themselves constitute territory. While there is no smell of gunpowder, the world has already entered a high-stakes era of 'digital nationalism,' with countries building walls around their data.

The global digital trade order can be largely summarized in two axes: 'status quo' between the United States and the European Union (EU), and 'digital decoupling' between the United States and China. For the past 30 years, the U.S. and EU have repeatedly clashed and reconciled over values regarding personal data protection and cross-border data transfers. In response to the indiscriminate expansion of U.S. big tech, the EU defined personal data protection as a fundamental right in the 1990s. Their agreements on data movement evolved from the Safe Harbor agreement in 2000, to the Privacy Shield in 2016, and finally to the 'EU-U.S. Data Privacy Framework (DPF)' in 2023. This was a precise political compromise that avoided catastrophe. Though the two sides are barely maintaining the status quo, the potential competition for digital supremacy continues to be very much alive.

The U.S. and China: The Main Battleground of the Digital Trade War

In contrast, the United States and China remain the fiercest battlegrounds for digital trade, with both sides putting national security at the forefront in a direct confrontation. The recent TikTok incident symbolically illustrates the depth of this conflict. China has maximized data sovereignty, raising barriers to technology control. The Chinese government has enacted strict regulations to block the overseas transfer of AI algorithms and source code, and has further fortified its so-called 'Great Firewall,' officially declaring the full nationalization of data. This stands in stark contrast to the U.S.'s liberal data norms. In particular, China has drastically raised the threshold for issuing Internet Content Provider (ICP) licenses and Electronic Data Interchange (EDI) licenses to foreign companies. As a result, independent foreign e-commerce platforms operating for local Chinese consumers have been effectively ousted. The few foreign companies that remain are now limited to operating as tenants within cross-border shopping zones, such as 'Jingdong Guoji,' established by major Chinese platforms.

Even behind last year’s U.S. universal tariff negotiations—which shook the world—there was, in effect, a sophisticated digital trade pressure campaign. At the time, the United States used manufacturing tariff reductions as leverage, setting preconditions such as the removal of regulations on U.S. big tech companies and a ban on network usage fees. This demonstrated that digital trade has become fully integrated into the realm of major trade negotiations. The U.S. was even more explicit in its demands to Southeast Asian countries such as Malaysia, Thailand, and Vietnam. While calling for these countries to open their data markets, the U.S. simultaneously sent contradictory double messages by demanding a rigorous severing of digital supply chains linked to China.

At the beginning of this year, the Iran crisis and the protracted war in the Middle East have led global trade discourse to focus on traditional issues like physical energy security and securing shipping routes, making it appear as though digital trade issues have subsided. However, as seen in the U.S. Trade Representative’s (USTR) '2026 Trade Policy Agenda,' the United States is unlikely to loosen its grip on digital trade hegemony.

Baek Kang-hoon, Deputy Prime Minister and Minister of Science and ICT, attended the Ministerial Meeting on Science and Technology held at the Government Seoul Office in Jongno-gu, Seoul on April 30, where he spoke about current issues such as the policy directions for data in the era of AI transformation. April 30, 2026 Photo by Jo Yongjun

The Need to Secure Global Digital Allies

The demands of the U.S. and China regarding data movement and protection are fundamentally incompatible. The U.S. is pushing for liberalization of cross-border data transfers and platform openness, while China is raising barriers for data localization and security control. If Korea were to fully adopt the standards of one side, it would be extremely difficult to avoid a fatal clash with the other. Moreover, Korea finds itself isolated in an intermediate position—more regulated than the U.S., but more open than China—placing it in a dilemma, exposed to pressure from both sides. Such an ambiguous, intermediate institutional position can be misinterpreted by both the U.S. and China as either 'insufficient cooperation' or 'excessive regulation.'

Once the geopolitical flames in the Middle East subside or the U.S. completes its calculations of practical interests, the U.S. could at any time resume digital trade pressure, wielding tools like manufacturing tariff rebates or reciprocal tariffs. Korea faces an extremely complex and high-stakes task: to participate closely in the U.S.-led data security alliance, while also managing stable data links with China.

Therefore, in order to avoid losing digital territory entirely between U.S. digital trade retaliation and China’s closed barriers, it is urgent to establish a proactive and meticulous digital trade strategy. Furthermore, Korea must strengthen strategic cooperation with European countries that are maintaining their own independent digital norms amidst the U.S.-China hegemony, and actively pursue multilateral digital trade agreements to secure a diverse range of global digital allies.

Ingyo Jeong, Professor of International Trade at Inha University (Former Chief Trade Negotiator)

This content was produced with the assistance of AI translation services.