The American Strength the Tariff Axe Never Touched

The biggest story of the past few months has probably been the tariff war. Every newspaper and outlet is debating what tariffs mean for the economy. Maybe I got lucky, but the information services field I work in happens to be one of America's great strengths — an area where the US runs a hefty surplus. American services exports total roughly $1 trillion, against imports of just over $700 billion, and a good chunk of that trade is information services from the likes of Facebook and Google. So tariffs barely touch it.

America's Information Services Dominance Rests on Its Financial Markets

But according to the conventional media narrative, aren't Americans supposed to be too lazy to actually make things? So why does the US run such a massive surplus in information trade? Here's the thing: in 2008, the EU's GDP was close to America's. Today the US economy is nearly 50% larger. China's GDP once climbed to about 80% of America's; now it's back down to roughly 60%. Information services is the foundation on which the US leaves every other country in the dust.

Why can Americans build such a huge trade surplus in information services while manufacturing eludes them? Can this state of affairs hold? Or will the rest of the world eventually catch up in information services the way China closed the gap in manufacturing?

To answer that, you have to go back to the nature of information services. The most profitable and most monopolistic layer of this industry is infrastructure — advertising, search, cloud, the substrate underlying AI. America's current surplus in information services comes mainly from the fact that Americans own essentially all of the internet era's infrastructure.

Take online advertising as an example. Nearly all the infrastructure sits with American firms — Google, Meta, and the like. Whether it's ad inventory, or the content platforms where that inventory lives (YouTube, Meta), or the trading systems and cloud services underneath, it's almost entirely American vendors.

Even third-party players — a company like The Trade Desk (TTD), an ad exchange platform — are American too. Virtually every piece of infrastructure that can be turned into cash sits in the hands of US information-service providers. Of the $790 billion in global digital advertising in 2024, American firms captured more than half — and that share keeps growing.

This dominance exists because America's information-service infrastructure is built on top of America's financial infrastructure. These internet-era foundational services are like railroads — you need to sink a lot of capital in up front before you can start producing the service on top of it. You need heavy pre-investment to get that infrastructure built at all. The Nasdaq is full of companies trading at price-to-sales ratios above 5x — Amazon is the classic example, a stock that traded at an absurdly high price-to-sales multiple for its first decade on the market.

Take Facebook or Google: at IPO, both were far, far smaller than they are today. But because they commanded sky-high P/E ratios (Google went public at 80x earnings, at a time when internet stocks were still in the doldrums) — and eye-popping price-to-sales multiples — they were able to raise enormous sums of capital to build out the market that came after. TTD, mentioned earlier, has traded at 10x-plus price-to-sales for years running, and as high as 40x at its peak.

Are investors just being foolish? Once foundational infrastructure like this takes shape, it very easily becomes a locked-in path of least resistance. And that's the fundamental difference between the US and every other country: American internet services can tap into financial services unique to the US, pulling in years' worth of future capital to build infrastructure — infrastructure that then finds it remarkably easy to break into international markets, because nobody wants to reinvent the wheel.

American investors are simply willing to bet big on stocks like this, and it becomes a self-fulfilling prophecy. Plenty of these bets turn out to be ugly ducklings that never transform — but internet companies that turn into swans keep showing up often enough.

Even Chinese internet firms, before this round of trade wars, tapped American financial services to create the US-listed China ADRs. Many of those ADRs were internet stocks, and they too relied on America's financial infrastructure to fund China's information-service needs. In effect, America's financial services successfully made American information services the substrate for the entire world.

The reality is that no other country's capital markets can finance projects at that scale — the kind of capital it takes to build infrastructure the way you'd build a railroad. That's the real backbone behind America's global dominance in information services.

The AI Revolution Reinforces the Monopoly — the Trend in Information Services Won't Change

There's another layer to this: because of path dependency, information services tend toward long-term concentration, and I believe American information-service providers' advantage isn't shrinking — it's growing. A lot of people conflate two separate questions — whether these Big Tech companies are, say, too expensive is a different question entirely. An individual company might see its stock drop because US courts force a breakup over excessive market power. But in practice, the competitiveness of America's information services industry as a whole is actually being reinforced by the AI revolution. What we can see in the market right now is a sharp concentration toward American information-service providers — and even the tariff war will only reinforce this path toward monopoly.

So coming back to the logic of the stock market: this is a long-term trend, and it's not one that's going to shift dramatically. Investors positioning their portfolios in the shadow of tariff uncertainty should keep this direction in mind.