intellectual property

In response to President Donald Trump’s tariff policies, many countries are considering retaliation, primarily through higher tariffs and import restrictions. While these measures may impact the U.S. economy, they also pose risks for the countries imposing them. The goal is to make the pain felt in the U.S. greater than the consequences suffered by the retaliating nation. While this strategy may hold true in many cases, countries like the European Union (EU), Canada, and other trading partners could take a more direct and potentially more damaging approach—targeting the United States’ intellectual property (IP) rights.

Intellectual property, particularly patents and copyrights, has long been a cornerstone of U.S. economic dominance. In 2024, the United States received nearly $150 billion in royalties and licensing fees alone, which makes up over 5% of total after-tax corporate profits. But these fees represent only the direct payments for IP use; they don’t account for embedded costs in products like software and technology, which are often used globally in consumer goods.

One possible retaliatory strategy involves countries announcing that they will no longer respect U.S. patents and copyrights for as long as Donald Trump continues his tariff policies. This kind of action would target U.S. companies that rely on their intellectual property rights for profit, such as tech giants like Microsoft and pharmaceutical companies like Pfizer and Merck.

The concept of not honoring foreign patents is not without precedent. During World War I, the U.S. invoked the Trading with the Enemy Act to allow the compulsory licensing of patents held by German companies. This measure allowed U.S. businesses to use these patents without permission, as long as they paid a minimal licensing fee set by the U.S. government. Countries like Canada, the EU, and others could implement a similar policy to challenge the United States’ trade practices.

The potential benefits of this type of retaliation are twofold. First, it would allow consumers in the retaliating countries to access cheaper products—such as generic drugs, which could drastically reduce the cost of life-saving medications like those used in cancer and heart disease treatments. Second, it would lower the cost of everyday goods like computers, by bypassing the licensing fees for software from companies like Microsoft.

For consumers, this could mean cheaper access to essential products and technologies, making it a win-win situation. Imagine having access to affordable generics of expensive drugs or the latest software without the added cost of licensing fees. This approach would directly benefit the people in those countries, and it would provide a powerful counterweight to the economic challenges posed by Trump’s tariffs.

Such an approach would also hit U.S. corporations where it hurts—potentially changing the landscape of global trade in ways that tariffs alone may not. If other nations got accustomed to accessing cheap drugs, software, and entertainment content, it could shift global perceptions of U.S. intellectual property practices. This shift could permanently disrupt the revenue models of many major U.S. companies that rely on high licensing fees and patent monopolies. For instance, without the constraints of patent monopolies, Americans themselves could spend far less on prescription drugs—possibly saving around $550 billion annually.