Canada now finds itself in economic war with the United States as President Donald Trump has levied a 25% tariff on all Canadian goods (10% for energy), which are scheduled to start on Tuesday. In response, Canada will levy retaliatory tariffs valued at $155 billion with $30 billion coming this week and another $125 billion in several weeks time. It is seemingly impossible to make sense of this deliberate targeting of an ally and claims this is linked to fentanyl that crosses the Canadian border into the U.S. doesn’t add up. Should this escalate further, the prospect of additional measures seem possible and that is where digital policy may come in. This week’s Law Bytes podcast examines the potential role of digital policy in support of retaliation against the Trump tariffs, including both defensive and offensive measures.
The podcast can be downloaded here, accessed on YouTube, and is embedded below. Subscribe to the podcast via Apple Podcast, Google Play, Spotify or the RSS feed. Updates on the podcast on Twitter at @Lawbytespod.
Show Notes:
Richard Gold, Canada Must Hit the U.S. Where It Hurts Most: Its Lucrative Patents
Credits:
ABC News, Canadian PM Trudeau Announces Retaliatory Tariffs on U.S., February 1, 2025
Related posts:
The Law Bytes Podcast, Episode 212: Matt Hatfield on the State of Canadian Digital Policy as Politicians Return from the Summer Recess
The Law Bytes Podcast, Episode 223: Looking Back at the Year in Canadian Digital Law and Policy
Why Years of Canadian Digital Policy Is Either Dead (Prorogation) or Likely to Die (Trump)
The Law Bytes Podcast, Episode 224: Why Prorogation and Donald Trump Spell the End of an Era in Canadian Digital Policy
I have 2 suggestions that we should pursue with the EU and other countries.
The first is to require social media, streaming and search companies that have more than $5M in Canadian/domestic revenue to run their Canadian/domestic business through a Canadian/domestic subsidiary that is subject to Canadian/domestic income tax. The DST could then be scrapped.
The second is to legislate Individual freedom of choice over what data is collected, how it’s used, and whether it is sold. Furthermore, individuals should have some control over what content is recommended by algorithms. For example, individuals should be able to pin their favourite categories at the top of a streaming service’s home screen.
This is essentially privacy reform, but using the terminology that Americans love so much. I mean you can’t be a good American if you oppose the right of the individual to choose how their information is used.
The second one I think bears some further examination I think. On the other hand the first one I am not so sure will do much. Remember, income tax on Canadian businesses is based on profit, not revenue. One of the ways around paying potentially higher Canadian business income taxes is to have the Canadian subsidiary pay fees to “head office” for various things, like marketing consulting, licensing to use the name, IT services provided by head office, etc. This can be used to reduce the domestic profit to a fairly small level, or even zero. This already occurs in a number of these subsidiary relationships.
Another way that we could retaliate is using the same excuses that POTUS uses for certain actions; national security. Force the sale of foreign owned defense contractors to Canadian ownership (for instance, General Dynamics Mission Systems Canada and Land Systems Canada, as well as Lockheed-Martin Canada). The national security excuse is used by the US for the domestic ownership of certain industries, Canada can use exactly the same excuse, and they really can’t complain.
Transfer pricing between head offices and subsidiaries is always an issue, but it is one that revenue canada has a lot of experience dealing with. The model I’m suggesting is how most foreign businesses operate in Canada, so extending that model to tech companies should be easier to justify.
Also, if the tech companies aren’t making money in Canada I would expect them to exit the market.