Less than two hours before new U.S. tariffs on Canada were set to take effect, U.S. President Trump last night announced a three-day pause, claiming there is a deal “subject to the finalization of documents.” Prime Minister Carney released a statement saying that substantial progress had been made, without offering much detail. But a congratulatory tweet from the U.S. Trade Representative offered one clue with significant implications for Canadian digital policy: the deal will include “digital trade alignment.” What might that mean? This post considers some of the possibilities.
Given that Canada already conceded on a digital services tax and the Online Streaming Act, formal commitments on both seem certain. The digital services tax was rescinded in June 2025 within days of Trump threatening to suspend all trade negotiations. Mandated contributions on Internet streaming services are also gone, as the government announced plans to kill the CRTC’s contribution ruling in June and a July court filing confirmed that the entire framework, including the base five per cent requirement, is dead. Both are easy inclusions since they require no new Canadian concessions, though converting domestic policy reversals into trade commitments would make it difficult for any future government to unwind.
Reversing the Online News Act and its mandated payment for news links is another likely target for digital alignment. The U.S. tech sector, led by the Computer & Communications Industry Association, has identified the “link tax” alongside the Online Streaming Act as discriminatory measures to be addressed in the CUSMA review, and the law has been a failure with news links blocked on Facebook and Instagram for three years and the government having hinted at an openness to reconsidering the law. Carney should not need much convincing to change course.
The end of the Online News Act would close the chapter on Canada’s previous digital policies, but more interesting is how much of “digital trade alignment” is future-focused. Data governance is surely part of the package with potential commitments to the free flow of cross-border data transfers together with limits on Canadian data localization requirements, an issue the U.S. placed on the table months ago when the 2026 National Trade Estimate report flagged the federal Shared Services Canada sovereign cloud proposal as a trade barrier. Commitments in this area could constrain federal sovereign cloud plans, provincial initiatives such as Alberta’s Sovereign Compute Environment, which excludes CLOUD Act providers, and future localization conditions in privacy law. CUSMA already contains data flow and localization provisions, so alignment here would likely mean tightening the existing rules and narrowing the exceptions. Such commitment would have significant implications for data sovereignty initiatives and be hard to square with an “elbows up” approach.
Bills currently before Parliament could also be part of a digital alignment package, though the U.S. has tended to focus on laws, not pending legislation. Nevertheless, Bill C-22’s lawful access provisions have drawn warnings from U.S. congressional leaders about encryption and metadata retention, and Bill C-34’s mandated age verification would require millions of Canadians to age-verify to use U.S. social media services. The U.S. has opposed age verification in the UK, which raises at a long-shot possibility that it gets included in a Canadian deal.
As I argued in a Globe and Mail op-ed last month, alignment could lead to Canadian asks as well. Most notably, the U.S. government has positioned itself as the effective gatekeeper of frontier AI, dictating who obtains access to the most capable models, when, and on what terms. That poses a risk that Canada will be left locked out and relegated to the second tier of AI. Given the emphasis on digital alignment, Canada could seek assurances that Canadian firms and agencies will be held to the same security requirements as their U.S. counterparts, with no exclusions based on nationality. If alignment means Canada adopting U.S. digital trade norms, the corresponding Canadian position should be full access to the digital economy those norms are built around.
