My Globe and Mail op-ed opens by noting that after years of dismissing the warnings of likely retaliation, the Canadian government caved to U.S. pressure earlier this week as it cancelled the digital services tax. Faced with the U.S. suspension of trade negotiations, Finance Minister François-Philippe Champagne announced that the government would rescind the legislation that created it.

The government was in a no-win situation: stick with the DST but face the prospect of higher tariffs, or embarrassingly drop it (and lose the projected $7.2-billion in revenue over five years) before the U.S. would agree to restart negotiations. Given the importance of a broad-based trade deal with the U.S., cancelling the DST is understandable, even if it exposes Canada’s weakness in the sprint toward a final trade agreement.

But more troubling is what might be characterized as a different Canadian DST: digital strategy trouble. If the digital tax debacle sounds familiar, it is because the Canadian government’s misreading of the tech sector has become a recurring problem. Time and again, government leaders talk tough when proposing digital policy, practically dare companies and foreign governments to push back, and then frantically seek an exit strategy when they do.

That was certainly the case with the trio of internet laws that formed the foundation of Canadian digital policy under the Trudeau-led government. The internet streaming bill, touted as an update of Canada’s broadcasting laws, first became mired in controversy over regulation of user content, and later bogged down in the courts when, as promised, internet streaming companies challenged the law. Years after its introduction, the law has generated no new revenues and it could become a future target for Trump trade threats.

Soon after, the Online News Act sparked heated opposition from the two targets – Meta Platforms Inc. and Google Inc. The government dismissed the risk of the companies blocking news links in response to the legislation, yet two years after the bill became law, news links are still blocked on Facebook and Instagram and the government was forced to revamp its legislation through regulation to get Google on board.

Most recently, the government ignored the critics who warned that it was overreaching with its online harms legislation. Sure enough, the bill never even made it to committee for further study as even the government’s late concession to carve out controversial Criminal Code and Human Rights Act provisions proved too little too late.

Beyond those laws, the government’s AI legislation found little support, leading Evan Solomon, the new Minister of AI and Digital Innovation, to acknowledge that it had “overindexed” on regulation. In other words, dismissing the concerns of AI companies created new risks of reduced investment and a declining role for Canada in the AI space.

Unfortunately, there are signals that this troubling strategy will continue. The Bill C-2 lawful access provisions create significant new costs and scope in surveillance requirements that may leave Canadian and foreign companies in legal quagmires where they cannot comply with both Canadian and U.S. laws. The opposition to the bill is likely to mount in the fall until the government tries to find a way out.

Further, last week the government released a joint statement with the European Union that says Canada and the EU will “align our frameworks and standards in the regulatory field, to make online platforms safer and more inclusive, to develop trustworthy AI systems and to establish interoperable digital identities and digital credentials to facilitate interactions between our citizens and our businesses.” This suggests more of the same moves by governments on online harms, AI regulation and speech regulation.

The government has too often viewed the tech sector primarily as a source of revenue for policy projects – “make web giants pay” – while overestimating the attractiveness of the Canadian market and underestimating the risks of costly regulation.

There is an obvious need for smart tech regulation, starting with doing a better job of protecting the things that matter – Canadians’ privacy, data sovereignty and marketplace fairness through robust competition laws. But the strategic blunders that culminated in the embarrassing decision to cave on the DST must lead to internal acknowledgment of a failed approach. When even your marquee policy for collecting revenues from the world’s leading tech companies crashes, it is time to admit that Canada desperately needs a tech regulation reset.