America’s Electric Offshore Acid Test

It's like a boulder rolling down a hill—you can watch it and talk about it and scream and say Shit! but you can't stop it. It's just a question of where it's going to go.

―Tom Wolfe, "The Electric Kool-Aid Acid Test"

American Eagle Outfitters recently released an ad campaign featuring actress Sydney Sweeney hawking denim jeans. The campaign grabbed massive attention and ginned-up plenty of controversy.

Viral marketing at its best.

But how’s that customer service going, American Eagle?

I decided to poke around Reddit and find out.

The posts were a mixed-bag… some happy customers, some not-so-happy customers… but one post stood out—

A relative has worked for AE for years answering calls and chats and she just learned they are getting rid of all US customer service reps. AMERICAN EAGLE has decided they can save a buck by removing customers ability to talk to an American representative when they call in for assistance. This is just another step in a long line of cheapifying a once great American company. Once this is implemented if you call, chat, or email in to AE, you will be redirected to a representative in southeast Asia. It isn't like these people were well paid anyways, but now to get rid of them all and replace them with a worse option is a really bad sign for the future of this brand. It's sad. For a company with such strong patriotic ties this sure is a knife in the back to your American workers! I am calling on all of us to boycott AE until they reverse this decision!

I can’t vouch for the accuracy of the post’s assertions. But the allegation that American Eagle’s customer support is fleeing to Asia made me think of Tom Petty’s classic dirge, “American Girl,” which came out way back in 1976, America’s Bicentennial year—

Well, she was an American girl

Raised on promises—

She couldn't help thinkin' that there

Was a little more to life

Somewhere else

After all it was a great big world

With lots of places to run to….

Which brings me to the "Keep Call Centers in America Act of 2025," timed perfectly for the commemoration of America’s 250^th anniversary of the battles of Lexington and Concord… the birth pangs of an ongoing American experiment that’s feeling increasingly… psychedelic.

Into the Looking-Glass

First, some context. It’s important to understand that the United States believes the international system is no longer working in its favor. Our American Girl is a fickle mistress. She now finds herself in relative decline, and it’s you, dear world, that she deems responsible for her plight. Hey, somebody’s gotta take the blame!

There’s also the matter of accelerating exponential technological change and the rapid digital transformation of economies. In The Widening Turn I urged readers to think about America’s ongoing adventures overseas as the product of an increasingly mercurial national personality that’s feeling threatened by all this global progress going on around it. America has grown wildly ambitious, even obsessed, with innovating its way to renewed global relevance (ie, dominance).

It’s not necessarily a stable situation geopolitically, economically, or for the financial markets.

So what’s all this got to do with the Keep Call Centers in America Act of 2025? Well, the act didn’t come out of nowhere… it’s surfacing from the depths of complex dynamics and is just the latest spasm in a long line of such proposals. All throughout the 21^st century in America, there have been repeated legislative proposals lashing out against “call centers,” “outsourcing,” “offshoring,” and more recently, “AI.”

Financial Crisis Follies: The Overdose

Early call center disclosure bills started percolating in the early- to mid-2000s. But it was in late 2008 that America’s real fever-dream began. Things took a more radical turn when American financialized capitalism overdosed on questionable financial products and went in extremis. TARP (the Troubled Assets Relief Program) aimed to stabilize the financial system by shooting America up with more of that which was ailing her… while authorizing the U.S. Treasury to purchase up to $700 billion in troubled assets from financial institutions.

At any rate, in January, 2009, a U.S. Representative by the name of Sue Myrick offered an amendment to the “TARP Reform and Accountability Act of 2009” (H.R. 384), introduced by Representative Barney Frank (D-MA). Myrick’s amendment sought to, “prevent any company that receives funds as part of the TARP from outsourcing any new customer service or call center jobs to a foreign-based company.”

The bill was passed by the House on January 21, 2009, but was never passed by the Senate. So too with the “Call Center Consumer’s Right to Know Act” (H.R. 3621), introduced by Congressman Jason Altmire (D-PA) in September, 2009. The act, which was heard in committee but never passed into law, would have required call centers to disclose the physical location of employees taking inbound or making outbound calls.

Skip ahead to 2012 and the 112^th Congress, when senators Robert Casey (D-PA), Richard Blumenthal (D-CT), Sherrod Brown (D-OH), Barbara Mikulski (D-MD), and Bernie Sanders (I-VT), sponsored the United States “Call Center Worker and Consumer Protection Act” of 2012 (S.B. 3402). It too died in committee. By 2015, the United States Call Center Worker and Consumer Protection Act was back, re‑introduced in 2016, and then given another shot at life in March, 2017 (H.R. 1300).

Each time the legislation failed to gain traction. It’s as if our politicians were a bunch of Merry Pranksters.

Barreling Toward the 2020s

But momentum and media coverage of these pesky “call centers” kept building. By June, 2019, U.S. Representative Mark Pocan (D-WI) and David B. McKinley (R-WV) reintroduced H.R. 3219, the U.S. Call Center and Consumer Protection Act, “to deter American companies from sending call center and service jobs to foreign countries.” U.S. Senator Robert Casey (D-PA) reintroduced companion legislation in the Senate—

The bipartisan bill would deter companies from sending American jobs overseas and incentivize them to locate in the United States by creating a public list consisting of companies that sent call center work overseas. Being on the list would make these actors ineligible for federal grants or guaranteed loans. The bill would also require overseas call centers to disclose their locations to customers and would require them to comply with consumers' requests to be transferred to a service agent physically located in the United States.

As had happened in the past, the bill was supported by the Communications Workers of America (CWA), which represents nearly 600,000 workers in the telecommunication industry. The CWA asked Americans—

Are you tired of big banks and corporations cutting costs by using overseas call centers? Not only do they put Americans out of work, but they put all of us at greater risk for identity theft. Overseas call center employees have been caught selling credit card numbers, mortgage information and even medical records.

The United States Call Center Worker and Consumer Protection Act (S.1792 and H.R. 3219) solves this problem by making sure that the people who answer your customer service calls let you know where they are located and give you the option to be transferred to a U.S. based representative. It also stops rewarding companies that ship jobs overseas with federal loans and grants.

Once again, however, the Merry Pranksters’ efforts came to naught.

Covid Crashes the Party: Anger Builds

While America’s fever dream of declining influence has been raising the collective temperature for decades, the Covid crisis signaled another turning-point for the global trading system. When the crisis hit, in February, 2020, I couldn’t help speculating, “How strange then, if a tiny, unexpected virus… triggers a process whereby the entire global economic system is utterly rearranged. The paradox is almost too strange to imagine. Amidst all the wonders of our electronically hyperconnected world, is it possible globalism lies on its deathbed?” (see, "Groans of Globalization: Present-Tense Sci-Fi")

There we were, getting ready to inject mRNA vaccines into the body politic when in May, 2020, I noted that, “as anti-outsourcing voices grow louder in the United States, workers are organizing in concrete ways…. might a growing populist fervor in the United States help forge a left-right labor coalition?” (see, "Outsourcing vs. a New Hamiltonianism: Is a Future Duel Inevitable?") In April, 2021, I offered a reminder that companies don’t exist in a social vacuum. To wit, “Your company won’t be sealed-off from shifting attitudes and behaviors. Any organization that employs large numbers of people (from BPOs to ITOs and beyond) might take note of what’s happening out there… and what it all might mean.” In effect, “populism isn’t going away anytime soon. Signs of rebellion seem to be everywhere.” (see, "Employer Maximus: Win the Crowd")

Those signs of rebellion reappeared three months later, on July 21, 2021, when another version of the United States Call Center Worker and Consumer Protection Act was introduced (H.R. 4603). It was re-introduced again in 2024 but was referred to a committee and never enacted.

Ending… er… Outsourcing!

Meantime, the “End Outsourcing Act” had started percolating in 2017 and reemerged in 2021 (S. 1513) thanks to Senator Kirsten Gillibrand (D-NY). It too was never enacted, despite support from the International Brotherhood of Teamsters. The “Bring Jobs Home Act” also appeared in multiple Congresses, most recently in 2024 (H.R. 8506) courtesy of Representative Bill Pascrell (D-NJ). It wasn’t enacted either.

Still, pushback against the very concept of “outsourcing” just wouldn’t go away. In February, 2025, the latest version of the “No Tax Breaks for Outsourcing Act” was introduced by Merry Pranksters Senator Sheldon Whitehouse (D-RI) and Congressman Lloyd Doggett (D-TX), aiming to “level the playing field for American companies by requiring multinational corporations to pay the same tax rate on profits earned abroad as they do in the United States.”

As I noted back in October, 2020—

One might also then argue that the decade of the 2000s that featured costly American overseas invasions and wars (in terms of both blood and treasure) and a massive financial crisis followed by an extended Great Recession, helped shatter the social contract here in the United States. A considerable amount of self-dealing by elites of both political parties has only added to the anger pulsing through society. (see, "From Hobgoblin to Hero: What if Outsourcing Stepped Out of the Shadows?")

State Governments Dive into the Scrum

But why should the pols in Washington, D.C. have all the fun? Over the years, angst was percolating on the state level as well. For example, in 2015, a New York state senator sponsored Senate Bill S757, the "Save New York Call Center Jobs Act," which, “requires prior notice of relocation of call center jobs from New York to a foreign country; directs the commissioner of labor to maintain a list of employers who move call center jobs; prohibits loans or grants.”

In September, 2022, the state of California, the largest state economy in the U.S. (approximately $3.9 trillion GDP, representing 14% of national GDP), passed Assembly Bill 1601 (effective January 1, 2023), requiring an employer of customer service employees in a call center to comply with the “California Worker Adjustment & Retraining Act” (WARN) prior to a mass layoff, relocation, or termination of employees. “Also under the new law, ‘relocation of a call center’ includes when the employer intends to move its call center, or one or more facilities or operating units within a call center to a foreign country.”

Keep Call Centers in America Act of 2025: AI Joins the Fray

Clearly, America is feeling strung-out. It’s one thing to wrestle with self-doubt in the face of relative decline, it’s another to wake up to a world of accelerating digital transformation and exponential technological change. Which brings us to August, 2025, and national efforts to place restrictions on “offshoring” in the form of proposed legislation which has reappeared under a new name and with new provisions regarding “AI.” Suddenly, the AI bogeyman has joined “outsourcing” and “offshoring” as dire threats to our feverish Republic.

Amidst our state of vertigo, Senator Ruben Gallego (D-AZ) and Senator Jim Justice (R-WV) have introduced the "Keep Call Centers in America Act of 2025," a bipartisan bill that “proposes to ensure such jobs remain in the U.S. by limiting federal benefits for companies who ship them overseas.” The bill also would mandate “that call center workers immediately disclose their physical locations to callers and disclose whether AI is being used. Also, customers would be able to request to be transferred to a U.S.-based call center, if they so desired, under the proposed piece of legislation.”

The bill appears to be driven in part by Bureau of Labor Statistics projections indicating a loss of 150,000 of the approximately 3 million call center jobs in the United States by 2033. Once again, the CWA supports this new bill. According to CWA Director of Government Affairs Dan Mauer, "This much-needed legislation protects U.S. call center jobs and addresses the growing threats posed by artificial intelligence and offshoring. Historically, companies have offshored customer service jobs to avoid paying good union wages and benefits. Now companies are using AI to de-skill and speed up work and displace jobs, which undermines worker rights and degrades service quality for consumers.”

You can almost feel our American Girl’s panic. According to Peggy Noonan last week in The Wall Street Journal, “This summer the knowledge settled in about where we are with artificial intelligence. Almost everyone is rattled by the speed of its development. The story is no longer ‘AI in coming decades will take a lot of jobs’ or ‘AI will take jobs sooner than we think.’ It is ‘AI is here and a quiet havoc has begun.’”

Hmm. “Cry havoc, and let slip the dogs of war!” wrote Shakespeare in Julius Caesar. For Noonan, it appears that, “Political figures are aware it is coming but unprepared for the scale and depth of disruption…. This will become one of the great political battles of the late 2020s and beyond.”

The Trump Factor: Seeking a New Fix?

Political battles indeed. Now imagine what would happen if President Donald J. Trump got directly involved. It should be noted that in 2019, ten senators, led by Senator Robert Casey, sent a letter to President Trump urging him to take executive action against offshoring call center jobs related to the federal government: “By issuing an executive order,” they wrote, “you can take an immediate step to prevent federal government contracts from being awarded to companies that offshore U.S. call center jobs by utilizing call centers in foreign countries. Taxpayer funds should go to companies that hire American workers.”

Proponents of such action would probably include lawmakers from the Rust Belt and Sun Belt, organized labor, even assorted national security hawks. And what if the Trump administration also suddenly decided to push beyond federal government contracts into the private sector? Who knows what could happen via executive order? After all, this is a man who just signed an executive order opening the 401(k) retirement market to private equity and crypto investments.

This is also a president who’s demanding a 15% cut on sales of Nvidia’s H20 and AMD’s MI308 chips to China. As The Wall Street Journal notes, “President Trump views tariffs as a toll that he alone gets to set for access to U.S. markets. Now he’s charging fees on U.S. companies for the purported privilege of exporting artificial-intelligence chips to China. Mark this as another step toward government control of private business…. In any case, this is an export tax that Congress didn’t authorize…. Step by step, Mr. Trump is expanding the long arm of the state into more of the private economy.”

Or as former U.S. Trade Representative Robert B. Zoellick puts it, “The rest of his government scrambles to discover the terms of the deals, sorting through the exceptions and side bargains—before the merry-go-round spins again. Enforcement will depend on Mr. Trump’s attention span and his latest fancy…. Mr. Trump’s tariffs and chaotic trade policy will yield a mishmash.”

“Tariffs” on Services: International Trade’s Coming Mishmash?

In the near term, the BPO industry will need to keep a close eye on policymakers’ efforts to influence the outsourcing space through proposals such as the Keep Call Centers in America Act. But, as wacky as it sounds, BPOs also might want to keep an eye on the push for actual “tariffs” on services. Or as I put it back in 2020—

Of course there’s no way of knowing if policymakers will be radicalized into action by the pressure of events. The institutional power of the political and media establishment and the entrenched influence of the financial sector are very real…. One might wonder—when it comes to global business services, what would unscrambling the omelet of global sourcing even look like? (see, "Outsourcing vs. a New Hamiltonianism: Is a Future Duel Inevitable?")

Today, we may as well take a guess. Contrary to the consensus narrative that tariffs don’t apply to outsourced services, Connext makes the point that a rise in tariffs on services is already underway… and it’s being driven by digital transformation and the economic dominance of the business services sector in the U.S. (for both the U.S. and E.U., services contribute over 70% of GDP). While tariffs on goods typically come in the form of import taxes, conceptualizing “tariffs” on services takes a little more imagination because it’s a bit more abstract and multidimensional. It’s also a definitional issue.

So while McKinsey can claim that, “The currently announced tariffs do not directly affect services, and tariffs have historically never been applied to services due to the difficulty of tracking their cross-border flow,” Connext would counter that new kinds of “tariffs” could take the form of everything from licensing requirements, local data storage mandates, cross border data flow restrictions, to restrictions on foreign ownership, visa/work permit restrictions, and discriminatory pricing or taxation.

For Connext, “These regulatory hurdles increase the cost or reduce the viability of foreign service providers operating in a given market. For example, cross-border data flow regulations may hinder customer support outsourcing or data analytics services—two areas critical for global business process outsourcing (BPO) providers.” Governments see digital services as strategic assets and industrial policy can be wielded to protect domestic service providers. “Governments are leveraging these tariffs as tools to protect local markets and capture revenue, particularly through digital services taxes (DSTs) and digital sovereignty policies.”

Indeed, while denying the existence of services tariffs, McKinsey quickly concedes that, “countries may use retaliatory mechanisms like digital services taxes (DSTs), which levy a tax on the revenues of a foreign company selling digital services within a specific jurisdiction, to respond to Washington’s trade actions. DSTs could be expected to largely impact the U.S. economy due to the large volume of digital services exports from the U.S.”

A Tariff Regime for the Digital Economy?

But the minutiae is important. Technically, today DSTs are applied to ad or platform revenue, not border duties. DSTs and value added taxes (VATs) are platform-collection models rather than border tariffs on services, alternative methods to collect revenue from digital trade.

Border tariffs on services would be something altogether different. When, in the fall of 2024, the World Trade Organization’s (“WTO”) 13th Ministerial Conference (“MC13”) extended the “ecommerce customs duty moratorium” for two years more years, providing another short reprieve for digital services companies from the imposition of tariffs… it was pertaining to "customs duties on electronic transmissions." Such customs duties on electronic transmissions are tariffs on digitally delivered goods (music files, ebooks, video games, cloud-based software, etc.), which treat the digital file like a physical import.

These customs duties on etransmissions are a narrower subset of what "tariffs on services" could look like. Tariffs on services would be broader, manifesting as trade restrictions on services provided across borders (as with customer support, cloud computing, consulting, financial services, etc.). Such tariffs would cover not just files but entire business processes and professional services.

The point being, imagine if countries treated entire digital services as “dutiable electronic transmissions” instead of just taxing files like movies or ebooks. In the context of customer support and BPO, this would mean when voice calls, chat logs, or customer records are transmitted across borders, they could be classified as taxable electronic transmissions. Governments could levy a duty per transaction or on the gross contract value. It would be the digital equivalent of taxing offshore call centers.

If governments expanded customs duties from files to services, it would spawn a “tariff regime for the digital economy” writ large. One can imagine companies responding to such pressure by localizing servers and operations in specific countries to avoid duties, accelerating digital protectionism.

But what countries would do such a thing? Well, India, South Africa, and Indonesia have actually raised the possibility of such schemes at the WTO, claiming the aforementioned WTO moratorium deprives developing countries of revenue and more room for policy action. They see reclaiming policy tools for digital trade as potentially strengthening industrial policy for developing countries.

If the moratorium did somehow lapse, some governments could reinterpret cross-border service delivery (calls, chats, ticket handling, remote CX operations) as “electronic transmissions” and levy customs-style duties on traffic or the value of contracts—effectively a digital import tariff on BPO. In other words, countries could reclassify cross-border delivery of voice calls or chat flows as “dutiable electronic transmissions,” resulting in per transaction fees or ad valorem surcharges on contract values.

As unlikely as such a scenario seems, escalating trade wars combined with the rapid pace of digital transformation is a dynamic that's forcing us to adapt our thinking as to what might someday constitute services tariffs. Also consider that cloud infrastructure and AI are becoming increasingly strategic. It’s therefore not so hard to envision targeted tariffs on telecommunications equipment or even cloud computing services. Although much ICT equipment is assembled in the Asia-Pacific region, distribution often flows through the U.S. And increased dependence on the cloud and real-time data and AI means any kind of tariff on cloud computing services would impact a diverse set of players.

Letting Slip the Dogs of War: Targeting Digital Labor?

But back to the U.S. Just imagine President Trump slapping a unique “tariff” on business services. Placing tariffs on intangible goods such as outsourcing contracts would be quite the change in U.S. trade policy. But in America’s current state, is some form of “tariff” on cross-border services imports impossible to imagine? Rather than a broad, across-the-board services tariff, the most likely target would be offshore call centers, IT outsourcing, and AI-based services that replace American jobs.

Consider the U.S. imposing a percentage surcharge on the value of a contract between an American firm and a foreign service provider, such as an overseas contact center (inbound, outbound, chat, email, and AI-assisted customer interaction handled outside the U.S.) or a BPO that does data-focused work (data entry, accounting, HR processing, legal back-office work) or AI and digital services (AI model training, chatbot operations, or analytics services provided from foreign jurisdictions where labor and data privacy standards are deemed wanting).

Such a tariff could be assessed at the point of payment, similar to a withholding tax on foreign vendors (for example, a U.S. buyer paying $100,000 to the U.S. government on a $1 million customer service contract to satisfy a 10% “offshore services tax”). These days, slapping fees on just about everything is the way of American financialized capitalism… our airlines love fees, our landlords love fees, our credit card companies love fees.

Collecting penalty surcharges from U.S. firms (or tax credit reversals) seems like a plausible route for the U.S. as time goes on. Or imagine something like a “high-risk country” surcharge, an additional 15% if services originate in countries designated as persistent violators of labor rights or data security by the U.S. Department of Labor or Commerce. Such changes in classic customs duties would apply penalties to firms that move service operations abroad or automate operations with foreign-supplied AI.

While U.S. firms could well accelerate the use of data, automation, and AI as a means to lessen dependence on outsourced overseas labor, would anyone be shocked to soon see a call to “Tax AI!”? Imagine an “automation offset fee” if services are provided via AI that replaces more than, say, 25% of a U.S. company’s workforce in that service line, resulting in the application of an extra 5% fee. Failures to report or misclassification would result in fines of varying amounts.

Now imagine incentives for domestic service production in the form of tax credits of up to 15% of payroll for bringing certain service jobs back to the U.S., or federal procurement preferences for companies certified as “100% Domestic Service Providers.”

Another Scenario (Including the “BAZOOKA!” Option)

Isn’t the service tariff acid trip a wild ride? Now ask yourself, what if another nation or trading bloc decided to fight back against an America overdosing on tariffs by targeting U.S. services specifically? For example, what if the E.U. eyed America’s transatlantic trade surplus in services and identified it as an Achilles’ heel?

As law professor Anu Bradford puts it, “Mr. Trump has frequently accused Europe of maintaining trade and digital policies that unfairly target American companies…. Europe has been adamant that the A.I. Act and other digital rules are not up for negotiation. As part of the recent U.S.-E.U. trade deal, Brussels agreed to buy more American energy and military equipment, but did not make concessions on tech regulation.”

Indeed, as The Financial Times alerts us, the final part of America’s trade deal with the European Union has been delayed by the E.U.’s desire to continue forcing tech companies to more actively police their sites. “The U.S. and the E.U. had already been expected to release a statement with the terms they reached last month, but disagreements over possible concessions to Europe’s Digital Services Act, which became law in 2024, have stalled the release of a formal joint statement.”

As recently as March, European Commission President Ursula von der Leyen was claiming that “all instruments” and “countermeasures” were on the table for the E.U. One can imagine wine glasses clinking all over Brussels as E.U. bureaucrats chattered about building on GDPR by taxing more digital flows with more digital services taxes.

Indeed, during trade negotiations between the U.S. and the E.U., a senior E.U. official told reporters Brussels could hit back at Trump’s tariffs by targeting U.S. services. “We are certainly not excluding a bigger response, a better response and an even more creative response through services, through [intellectual property rights].” The E.U. also could decide to cut U.S. companies off from accessing public contracts through its International Procurement Instrument.

It’s easy to forget that as recently as March, the Europeans were even considering the “bazooka” option. “As a last resort the E.U. can deploy its trade ‘bazooka’—the Anti-Coercion Instrument. As the name suggests, it would enable a broad spectrum response, including targeting services, if Brussels concludes that U.S. trade actions are excessive.”

The American tech industry would be most hurt in this unlikely escalation spiral, but wouldn’t their outsourcing partners also be casualties? Not to mention the complex spillover effects that might slow-down enterprise decision-making and strategic planning… or harm international business relationships.

And what of trade relations with India, a vast BPO market vis-à-vis the United States? Like the E.U., it too is working on their own A.I. laws aimed at mitigating potential risks of the technology. Could tensions somehow spillover into the realm of business services?—

Without naming Mr. Trump, who until recently he considered a political friend, or his tariffs, Mr. Modi nonetheless delivered a message on the subject. He made reference to tough times ahead—and the need for India to go it alone. That way, he said, ‘no selfish interest will ever be able to entrap us.’ He extolled the virtues of self-reliance…. But for the Indian technocrats and economists who for generations have pushed India toward free trade as the best way up the ladder of prosperity, Mr. Modi’s rally cry sounded like a step backward.

The Counter Revolutionaries: Barriers to Action

We should take a breath. Capitol Hill’s Merry Pranksters will face considerable opposition to their schemes. The forces arrayed against the aforementioned psychedelic scenarios are formidable. Clearly, durable, broad-based anti-outsourcing laws are difficult to pass in the United States Congress. Opponents include Big Tech, Wall Street, multinational service firms, and advocates of “free trade.” Legislating around federal contracting, tax incentives, and international commerce touches trade law, procurement rules, and tax treaties… and raises concerns about retaliation, WTO implications, or higher costs for consumers.

As for tariffs on services, according to the International Chamber of Commerce (ICC), services “can’t realistically be tariffed and shouldn’t be.”—

In today’s digital economy, cross-border services are essential to how businesses operate, grow and compete. But while goods have long been subject to customs tariffs, applying tariffs to services would be both impractical and create significant legal, operational, and economic risks. This is because services are fundamentally different from goods, making them virtually unworkable to tax at borders. Unlike physical products that customs agents can see and inspect, services are intangible—think of things like consulting, software, or design work—that often cross borders digitally or through the movement of people, rather than in shipping containers.  

The U.S. is also bound by the General Agreement on Trade in Services (GATS), a treaty of the World Trade Organization (WTO), which makes outright service “tariffs” tricky without risking disputes and legal challenges. Trading partners could threaten to hit back with tariffs on U.S. service exports (finance, entertainment, consulting), which are a big surplus area for America. And there would be high enforcement costs. According to the ICC, “Tariffs on services would also increase compliance burdens and administrative costs for governments, requiring entirely new systems to monitor digital transactions, register providers, and audit contracts.”

No wonder that, up to now, the U.S. Congress has preferred to wield incentives (tax credits to bring jobs back) rather than more punitive restrictions. Congress has also chosen to leave such matters to agencies and defer to procurement rules. In fact, “outsourcing” in all its forms is deeply entrenched. Just take a look at one list of companies outsourcing their contact center work.

The ”Keep Call Centers in America Act”: What to Do?

So what to do if you’re a global BPO with skin in the American game? Or an American firm already outsourcing work offshore? When it comes to the Keep Call Centers in America Act, The National Law Review offers the following—

Overall, the Keep Call Centers in America Act remains in the early stages of the legislative process. Whether it advances through committee or gains broader congressional support remains to be seen at this time. However, it reflects a growing focus on regulating the intersection of technology, labor, and consumer interaction. We are witnessing this as an area of increasing relevance to businesses operating in highly regulated communications spaces.

As a result, “Companies using AI or offshore call routing in their customer service operations may want to monitor the bill’s progress and evaluate whether any proactive adjustments to internal policies are warranted. The bill’s requirements would take effect one year after enactment, providing companies time to adjust their operations.”

Potential Tariffs on Services: What to Do?

The barriers to services tariffs are very real. On the other hand, t’s also true that in the unpredictable and chaotic American thicket of laws and legislation I recently dubbed “Lawlywoodland,” anything can happen. (see, “Lawlywoodland: Truth, Justice, & the American Way”)

All sorts of scenarios are possible. As Greg Ip says in The Wall Street Journal, “To admirers, Trump’s appeal is his willingness to bulldoze those lawyerly obstacles. He has imposed tariffs on an array of countries and sectors, seizing authority that is supposed to belong to Congress.”

Indeed, Trump is taking the tariff struggle to a whole new level. “He is betting that other countries care about access to the American market—he calls the United States ‘a giant, beautiful store’ and ‘the biggest department store in history.’”

Emma Ashford, a senior fellow at the Stimson Center who studies U.S. foreign policy, suggests conceptualizing all this as the continuation of a trend toward evermore draconian coercive economic measures by the U.S. in recent years. “We keep using bigger and bigger economic guns when it becomes apparent that the smaller ones aren’t achieving what we want.” Or as one former senior State Department official put it, “Trump’s secret weapon is doing what other leaders neither expect or would do themselves.”

On the other hand, at the end of May, the U.S. Court of International Trade ruled to strike down Trump’s sweeping global tariffs. In effect, the ruling challenges the Trump administration’s assertion of executive power on international trade. In turn, lawyers for the administration notified the court they would appeal the decision. What happens if Trump's tariffs are overturned by the U.S. Supreme Court? Talk about acid trips!

Then again… law? What law? Edward Rock, a professor of corporate governance at New York University points out that, amazingly, “if the government encouraged a company to shut down its offshoring plans, for example, we don’t have doctrines in corporate law that allow us to analyze that situation.”

Acid trip indeed.

But back to the matter at hand. Could tariffs on services potentially upend the offshore outsourcing business model? Who knows. But remember, “As the world becomes increasingly digital, regulatory frameworks will evolve, adding new layers of complexity to cross-border operations. Universal tariffs, additional tariffs, and separate tariffs will continue to shape the landscape.” BPOs must stay up to date on the nuances of everything from digital infrastructure localization to compliance management and all manner of new schemes coming from our Merry Pranksters on Capitol Hill.

Or as McKinsey puts it, “Given the web of interdependencies governing global trade and the tariffs’ varying impact on different sectors and countries, it’s clear that businesses can’t define and prepare for the future using traditional forecasting and planning methods.” Old rules no longer apply. We're living amidst a new type of politics. Old models are no longer "fit for purpose in a transactional, power-driven world."

Which is another way of saying, the way things are going in Lawlywoodland, never say never when it comes to unique services tariffs emerging over time. As pointed out back in 2020—

Either way, forging a New Normal is going to take imagination. Carl Jung once said that ‘People don’t have ideas, ideas have people.’ We are all more captive to our mental models of what constitutes our possible futures than we realize. Just think how many enterprises and outsourcing providers were caught off guard by a global pandemic. (see, "Outsourcing vs. a New Hamiltonianism: Is a Future Duel Inevitable"?)

Rejigging the American economic model in fundamental ways was not so easy to imagine five years ago, especially when it came to contact centers and the BPO industry writ large. Post pandemic, under Donald J. Trump, it’s getting a lot easier than it once was. As Greg Ip puts it in The Wall Street Journal, “So call this… ‘state capitalism with American characteristics’…. a sea change from the free-market ethos the U.S. once embodied.”

Image credit: The Indian Express (indianexpress.com)