In the global technological and industrial changes, digital trade is particularly important in promoting the process of industrial intelligent manufacturing transformation. This paper measures the comprehensive index of digital trade development level through the entropy weight TOPSIS method and grey correlation dynamic evaluation method, and calculates the comprehensive index of industrial transformation and upgrading with the help of exploratory factor analysis method to comprehensively examine the impact of digital trade on China’s industrial transformation and upgrading in three dimensions: provincial level, city level, and enterprise level. The study shows that digital trade significantly promotes China’ s industrial transformation and upgrading and has a stronger impact on the central and western regions, peripheral cities, low-value chain embedded positions, and non-state-owned enterprises, with a certain pro-poor characteristic. The mechanism of action shows that reducing transaction costs, stimulating innovation and entrepreneurial activity, and improving the efficiency of labor factor allocation are important paths for digital trade to promote industrial transformation and upgrading. Finally, the expansive analysis concludes that there is a positive spatial spillover effect of the impact of digital trade on industrial transformation and upgrading. Therefore, it is necessary to accelerate the construction of new infrastructure, build a spatial pattern for the high-quality development of digital trade, promote the development of a new type of industrial supply-demand relationship and ecological synergy, and achieve the comprehensive transformation and upgrading of industries.